Yen Slips Further as Japan Observes Coming of Age Day

January 14, 2013

Press reports over the weekend claiming that the Bank of Japan and government leaders have reached an accord on a change of inflation target sent the yen as low as 89.695 per dollar and 120.155 per euro.  A joint statement will reportedly be released after the monthly meeting of the Bank of Japan Board, unveiling a non-binding 2% inflation goal.  There will be no specified timetable for achieving the objective, however.

Compared to closing levels last week, the dollar has climbed 0.4% against the Swiss franc, 0.3% versus sterling and 0.1% against the yen and yuan.  The dollar is 0.6% and 0.3% softer relative to the kiwi and Aussie dollar, and it has edged 0.1% lower against the loonie and euro.

Today’s other big development out of Asia was a rise of more than 3.0% in Chinese share prices.  Elsewhere in the Pacific Rim, Japanese markets were closed for the Coming of Age holiday, and equities rose 1.8% in Indonesia, 1.2% in India, 0.9% in Thailand, 0.6% in Hong Kong, 0.5% in New Zealand and South Korea and 0.2% in Australia.  In Europe, stocks are up 0.7% in Italy, 0.6% in Germany, 0.4% in France, 0.3% in Spain, and 0.1% in Britain.

Ten-year British gilt and German bund yields fell by four and three basis points.  There has been a moderate upward correction to 10-year Spanish sovereign debt yields after their steep recent decline.

Oil and gold prices rose 0.6% and 0.5% to $94.16 per barrel and $1668.20 per ounce.

Industrial production in the euro area posted a third consecutive monthly decline, dropping 0.3% in November.  Output was 3.7% lower than a year before and for October-November combined was 2.4% below the average level in the third quarter.  Large November-over-October drops were recorded in Portugal of 3.4%, Spain of 2.5%, Greece of 1.5%, and Italy of 1.0%.  Relative to November 2011, production fell by 7.6% in Italy, 4.0% in Portugal, 3.2% in France, 3.1% in Greece, and 3.0% in Germany.

German wholesale prices were unchanged on month in December and retained a 12-month increase of 3.2%.  The WPI increased 2.8% in full-2012, down from a 7.5% average advance in 2011.

Ireland’s construction purchasing managers index printed 0.4 points higher at 43.0 in December, indicating the slowest pace of contraction in seven months.

Finnish CPI inflation accelerated to 2.4% in December from 2.2% in November, while retail sales posted a 4.6% increase from a year earlier that month.  Greek import prices dropped 1.0% on month in November and were just 0.7% higher than a year earlier.  Spanish home sales in November were 6.1% lower than a year earlier. 

The British National Institute of Economic and Social Research said GDP declined roughly 0.3% last quarter.  French businesses and unions agreed to new labor market reforms.

Indian WPI inflation continued to recede modestly, posting a 12-month 7.18% increase in December after a 7.24% rise during the year to November.

In Australia, home loans underperformed expectations, dropping by 0.5% in November, and a 3.8% decline in job ads was the ninth decrease in a row.  The TD-MI gauge of expected Australian CPI inflation over the coming year edged down a tenth of a percentage point to 2.4%.

The Bank of Canada will be releasing its business outlook and senior loan officer surveys today.  No meaningful U.S. data are scheduled.  However, Fed Chairman Bernanke as well as regional presidents Evans of Chicago, Dudley of New York, Williams of San Francisco and Lockhart of Atlanta speak publicly.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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