Falling Yen Trend Extended

December 26, 2012

Much of Europe remains shut for holiday, including Britain, Switzerland, Germany, Italy and Greece.  Canada, New Zealand and Australia are also closed for Boxing Day.

There were a number of Japanese developments.

  • Shinzo Abe was chosen prime minister by the newly elected parliaments.  Since Koizumi, who served several years through September 2006, Japan has had a string of one year or less prime ministers: Abe, Fukuda, Aso, Hatayama, Kan, Noda, and now Abe for a second stint.
  • Abe’s cabinet was unveiled.  Former Prime Minister Taro Aso was appointed finance minister.  Other cabinet members include Motegi at the Ministry of Economics, Trade and Industry, Onodera at Defense, Kishida at Foreign, and Amari as Economics Minister.
  • The Chamber of Commerce favors a dollar/yen rate no weaker than 90.0.  The 85 per dollar level has emerged as a line in the sand through which the yen must not strengthen.  At 85.51 earlier today, the dollar hit its highest yen level since April 7, 2011.  At 112.96, the euro was at its best yen level since August 4, 2011.  Compared to levels on October 11 of this year, the yen has fallen by 8.8% against the dollar and 11.3% versus the euro.
  • Published minutes of the Bank of Japan’s November policy meeting indicated that a proposal was made by a Board member but not accepted immediately by the majority for unlimited asset purchases without any time dimension until 1% inflation is secured.  Several members were prepared to undertake a more aggressive stimulus if the risks to the economy were to rise “substantially.”
  • The Shoko Chukin index of small business confidence recovered 0.5 points to a three-month high of 43.8 from November’s 17-month low.
  • The Nikkei-225 equity index jumped another 1.5% to 10,230 in expectations of much greater spending on public works and a big expansion of monetary stimulus.  The 10-year JGB yield firmed two basis points to 0.79%.  The Nikkei has advanced 18.1% since November 13, while the 10-year Japanese sovereign debt yield is nine basis points above its December 14th low.

Besides climbing 0.8% on balance overnight against the yen, the dollar shows losses of 0.6% against the euro, 0.3% versus the Swiss franc and 0.1% relative to sterling.  The U.S. currency is unchanged against the Australian dollar and up by 0.3% against the kiwi, 0.2% versus the loonie and 0.1% vis-a-vis the yuan.

The South Korean won remains well bid and trading near a 15-month high of 1070.73 per dollar.

Stocks in China rose 0.4% overnight.

Gold prices are steady at $1659.10 per ounce.  The price of WTI crude Oil increased 0.7% to $89.20 per barrel.

South Korean consumer confidence printed at 99 in December, the fourth such reading in the last five months.  The score had dipped to 98 in October and was 100 in July.

China’s third-quarter current account surplus was revised marginally to $70.8 billion.  The January-September surplus accrued to $148 billion.

Thailand posted a $1.45 billion trade deficit in November and a $15.71 billion January-November shortfall.  In the 11-month tally, exports and imports were 2.3% and 8.6% greater than a year earlier.  Thailand’s government is projecting a GDP rise of about 5% next year.

Industrial production in Singapore rose 1.9% in November and by 3.1% from a year earlier.

M3 money in India was 12.9% higher than a year earlier in December, down from a 16.9% advance in the prior year.

Manufacturing confidence in Turkey took a blow in December, dropping 3.1 points to a reading of 97.9 from 101.0 in November.  In the construction sector, confidence sagged to 71.8 from 76.2. 

U.S. President Obama has ended his visit to Hawaii early and is returning to Washington to resume negotiations to avert the full fiscal cliff in January.  The best chance is a temporary patch until a more comprehensive agreement can be fashioned next year.  The outlook of these talks continues to shift from hour to hour.

The U.S. markets will reopen today.  Preliminary indicators are that U.S. holiday shopping rose less than 1% this year.  Scheduled U.S. data releases include the Case Shiller house price index and the Richmond Fed manufacturing index, plus weekly chain store sales and mortgage applications.  Japan will be releasing a slew of indicators on Friday.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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