Yen Surprise
February 8, 2013
The Japanese yen rose 1.1% against the dollar, strengthened by the remarks of Finance Minister Aso that the currency’s fall from 78 through 90 had been faster than expected. There was confusion around the translation of exactly what he said. Make no mistake, however, officials led by Aso and Abe had previously engaged in verbal intervention to weaken the yen previously, and a depreciating direction remains their desire. This isn’t the first episode when Japan has talked its currency lower. Because of the controversial nature of beggar-thy-neighbor currency management, it’s common to see a counter remark to the effect of asking, “Did we do that?” In such a way, the true intent of the policy and role of officials in steering the yen is obscured.
The dollar also lost 0.7% against the kiwi overnight and fell by 0.6% versus the Australian dollar and sterling, 0.3% against the Swiss franc, and 0.2% relative to the euro and yuan. The Canadian dollar is steady.
The Nikkei responded inversely to the yen’s movement, falling 1.8%. Stocks in India and Indonesia declined by 0.5% and 0.3%, but most other markets in the Pacific Rim went up. Stocks rose 1.0% in South Korea, 0.7% in New Zealand and Australia, 0.4% in China, and 0.3% in Taiwan, Singapore, and Malaysia. In Europe, equities have climbed 1.0% in Spain, 0.9% in Italy, 0.7% in France, 0.5% in Britain, and 0.4% in Germany.
The British 10-year gilt yield dipped a basis point, while its Japanese and German counterparts held steady.
WTI crude oil is 0.5% firmer at $96.28 per barrel, whereas gold is stable at $1671.6 per ounce.
China, Japan, and Germany released trade data. China also reported growth in money and bank lending and the CPI and PPI.
China’s $29.2 billion trade surplus in January was larger than anticipated and embodied healthy on-year growth of 25.0% in exports and 28.8% in imports. The monthly average surplus last year was $19.25 billion, by comparison, and the surplus in January 2012 amounted to $27.3 billion.
Chinese M2 money growth accelerated to 15.9% in January from 13.8% in December. M1 money shot up 15.3% versus 6.5% in the year to December, also surpassing expectations. The most encouraging figure involved bank lending of 1.07 trillion yuan, more than the combined total of November and December. CPI inflation in January settled back to November’s 2.0% pace from 2.5% in December. Producer prices fell 1.6% between January 2012 and January 2013.
Japan recorded a second successive non-seasonally adjusted current account deficit in December, amounting to JPY 264 billion. The merchandise trade deficit of JPY 568 billion was almost four times bigger than the deficit in December 2011 and embodied a 6.9% drop in exports and a 0.8% on-year rise of exports. The seasonally adjusted trade surplus narrowed to JPY 98 billion in December from JPY 226 billion in November and JPY 414 billion in October. Japan’s current account surplus last year of JPY 4.71 trillion was 51% smaller than the 2011 surplus. Exports of goods declined 2.1% on top of a 1.9% drop in 2011. The Basic Balance (current account plus long-term capital flows) swung from a JPY 13.7 trillion surplus in 2011 to a JPY 7.65 trillion deficit in 2012. Japan’s customs clearance trade deficit in the first twenty days of January narrowed 25%, however, from a year earlier to JPY 1.17 trillion.
Stock and bond transactions last month generated a JPY 2.16 trillion net Japanese capital inflow as foreigners acquired JPY 1.14 trillion of Japanese equities, while Japanese sold JPY 943 billion worth of foreign stocks.
Japan’s economy watchers index, a measure that captures the activity seen by service sector workers, improved strongly in January to a reading of 49.5 from 45.8 in December, 40.0 in November, and 39.0 in October. The outlook component jumped to 56.5 from scores of 51.0 in December and 41.9 in November.
Bank lending in Japan posted on-year growth of 1.3% in January versus 1.0% in the fourth quarter and 0.8% in the third quarter of 2012. In another encouraging sign, Japan had 10.2% fewer bankruptcies reported in January than a year earlier.
Germany recorded current account surpluses of EUR 17.3 billion in December and EUR 166.9 billion in 2013. The latter was 13.4% wider than in 2012. The seasonally adjusted merchandise trade surplus equaled EUR 16.8 billion in December and averaged EUR 15.7 billion per month in both the final quarter of 2012 and 2012 as a whole. Exports rose 3.4% last year but were 6.9% smaller in December than a year earlier. German real manufacturing turnover posted a 3.1% on-year drop in December.
The U.S. and Canada report their trade data shortly.
Peru’s central bank left its reference interest rate unchanged at 4.25% as was expected.
A major snowstorm hitting the U.S. northeast today will be a distracting factor for U.S. traders.
Selected Asian markets will be closed a good part of next week for the Chinese New Year.
Italian industrial production rose 0.4% in December but posted a 1.6% working day-adjusted decline from a year before. Dutch industrial production rose 0.7% in December and was 2.8% higher than a year earlier. Norwegian factory output also exceeded the December 2011 level by that amount.
French business sentiment ticked a point higher in January to a reading of 95, according to the Bank of France.
Swiss retail sales volume was 5.1% greater in December than a year earlier. Nominal sales advanced by 3.4% on year. The Swiss jobless rate was 3.1% last month.
In the Reserve Bank of Australia’s latest Quarterly Monetary Policy Statement published today, projected GDP in the first half of 2013 was revised down to a pace of 2.5% from 2.75%. Total and core inflation were also revised lower.
Besides trade figures, Canada will be reporting monthly labor statistics, housing starts, and securities transactions. U.S. wholesale inventories are due.
Copyright 2013, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Chinese trade, Finance Minister Aso, German current account, Yen
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