Fresh Signals Regarding the Yen

April 9, 2013

An amber light on yen depreciation was flashed by a key advisor to Japanese Prime Minister Abe.  Mr. Hamada suggested that 100 per dollar is a much more appropriate and competitive level.

The dollar has fallen back 0.4% against the yen.  It has also dropped 0.4% relative to sterling as well as 0.5% versus the Australian dollar, 0.3% against the euro, 0.2% versus the kiwi and 0.1% against the loonie.  The Swiss franc and Chinese yuan are steady against the dollar.

Stocks in the Pacific Rim closed mixed, with a drop of 1.2% in India, no change in Japan’s Nikkei, and rises of 1.5% in Australia and 0.7% in both China and Hong Kong.  In Europe, share prices so far have risen today by 1.0% in Italy, 0.7% in Spain, 0.6% in France, 0.4% in Britain and 0.3% in Germany.

The price of gold is unchanged at $1573.20 per ounce, while oil edged up 0.2% to $93.51 per barrel.

Ten-year sovereign debt yields have firmed by four basis points in Britain, three bps in Germany and one basis point in Japan.

A lot of data, mostly of a second-tier nature from the standpoint of market influence, has been released.  The main data developments are

  • Disappointing month-on-month declines in German imports and exports of 3.8% and 1.5% in February that overshadowed a larger EUR 17.1 billion seasonally adjusted trade surplus.  Weak two-way trade flows accentuate the recessionary condition of continental Europe.  The current account surplus widened to EUR 16.0 billion from EUR 13.8 billion in January and EUR 14.9 billion in February 2012, helped by smaller net transfer payments.
  • China reported lower CPI and PPI inflation than analysts were anticipating, giving officials more latitude in the future to allow faster economic recovery.  Consumer prices dropped 0.9% on month and to a 12-month increase of 2.1% in March from 3.2% in February and 2.5% at end-2012.  Food price inflation was more than halved to 2.7% from 6.0% in January.  The PPI posted an on-year drop of 1.9% in March after decreases of 1.6% in the first two months of 2013.
  • British industrial production advanced 1.0% in February, beating forecasts, but January’s decline was revised to a larger figure of minus 1.3%.  Industrial production and factory output were respectively 2.2% and 1.4% lower than in February 2012.

Published minutes from the Bank of Japan’s March 6-7 Board meeting, the last presided over by former Governor Shirakawa, contained no surprises.  Although six of nine members of that Board remain under newly appointed Governor Kuroda’s stewardship, all but one fell into line supporting a much more aggressive monetary easing at last week’s meeting.

Australia’s business conditions index weakened four points to a reading of minus 7, the weakest level since May 2009.  However, business confidence ticked up a point to +2.  Business sentiment in New Zealand improved three points last quarter to 23 from a score of 20 in 4Q12.

The British goods and services trade deficit widened 46% on month to GBP 3.64 billion in February.  The goods only deficit was GBP 9.42 billion after a merchandise trade deficit of GBP 8.17 billion in January.  Exports fell 2.1% on month, whereas imports recorded a 2.2% increase.  The Royal Institute of Chartered Surveyors British house price balance index improved more than forecast to minus 1% last month from minus 7% in February.  Same store sales according to British Retail Consortium data were 1.9% higher than a year before in March, down from a 2.7% on-year increase in February.

The French trade deficit widened to EUR 6.01 billion in February from EUR 5.65 billion in January.  The Bank of France predicted that French GDP would edge up 0.1% in 1Q13, thereby avoiding consecutive quarters of negative growth, after announcing that a disappointing two-point drop in business sentiment to a score of 93 in March.

Several countries besides China released price data.  Swiss consumer prices were 0.6% lower than a year before in March.  In September 2011, the Swiss National Bank imposed a cap on the franc’s strength against the euro in order to combat deflation.  Czech CPI inflation held steady in March at 1.7%.  Dutch CPI inflation dipped to 2.9% in March from 3.0% in February.  Greek consumer prices were 0.2% lower than a year earlier in March.  Italian wage inflation ticked downward to 1.4% in February from 1.5% in January and 1.7% in December.  Wages were unchanged on month.  Harmonized Cypriot consumer price inflation slowed to 1.3% in March from 1.8% the month before.  New Zealand house prices climbed 6.5% in the year to March.

Denmark recorded surpluses in February of DKK 3.5 billion in the current account and DKK 3.9 billion in merchandise trade.  Both surpluses were smaller than those in January.  Romania had a EUR 210 million trade deficit in February, almost 50% narrower than in the prior month.  Portugal’s trade shortfall of EUR 2.23 billion in February was almost identical to the January deficit. 

Dutch industrial production was 1.7% below its year-earlier level in February following a 2.6% decline in January.  Greek industrial output tumbled 3.9% on year in February after a 4.2% drop in the year to January.  Romanian industrial production, on the other hand, was 5.4% larger than a year before.

Swiss retail sales dipped 0.3% in February but were 2.4% greater than a year earlier.  The Swiss jobless rate held at a 3.1% seasonally adjusted level in March.  Czech unemployment ticked a tenth percentage point lower to 8.0% in March.

Japanese machine tool orders fell 21.6% between March 2012 and March 2013. 

In his speech last night, U.S. Fed Chairman Bernanke stressed that the U.S. economy was still lagging behind an acceptable performance.  U.S. small business sentiment according to the NIFB index fell by 1.3 points on month to a March reading of 89.5.  The Labor Department releases its JOLTS index today of job hirings, firings and other separations.  This formerly esoteric index has lately taken on greater significance because it has been identified by Fed officials as a different source of useful information on the labor market for guiding decisions on bond buying.

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

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