Euro Stronger and Dollar Soft

April 11, 2013

The euro reached new highs of $1.3135 and JPY 130.84.  The yen matched but did not go through yesterday’s low of 99.87 per dollar.  On balance since Wednesday’s closing levels, the dollar shows losses of 1.0% against the kiwi, 0.6% versus the loonie, 0.5% relative to the Swiss franc, 0.4% against the euro and sterling and 0.3% vis-a-vis the Australian dollar.  The Chinese yuan is unchanged after the release of stronger-than-forecast Chinese money and credit growth data.

Equities are mostly higher.  Japan’s Nikkei closed up 2.0%.  Other Pacific Rim advances occurred in Indonesia (1.0%), Taiwan (1.4%), Australia (0.8%), South Korea and India (0.7% each), Malaysia (0.6%) and Singapore (0.5%).  Stocks have also risen 0.4% in Germany, France and Italy and by 0.3% in Britain.  Stocks are down 0.3% in China and 0.2% in New Zealand and Spain.  U.S. futures point to a rise in stocks at their open.

The 10-year German bund slid a basis point, while the British gilt and Japanese JGB show steady yields.  South Korean sovereign debt yields rose sharply when the central bank failed to cut its main interest rate.

Gold and oil prices drifted 0.1% lower to $1557.30 per ounce and $94.56 per barrel.

China reported 1.06 trillion yuan of new bank loans last month, the second time in three months for such to exceed a trillion yuan.  M2 money growth accelerated to a 15.7% 12-month increase from 15.2% in February, and M1 money posted a rise of 11.9% following a 9.5% increase. 

Chinese reserves grew $128.4 billion to $3.44 trillion last quarter.  That’s much larger than the rise in the final quarter of 2012.

In somewhat of a surprise, officials at the Bank of Korea failed to cut the 2.75% seven-day repo rate.  An easing had been expected by some analysts because of tensions with North Korea and in response to yen depreciation.

Bank of Japan Governor Kuroda injected some wiggle room into policy by asserting that modification could occur before the 2% inflation target is secured if growth previously becomes excessive.  He also dispelled speculation that additional easing would be announced at the next policy meeting later this month.

Bank Indonesia retained its reference interest rate of 5.75%.  It’s been at that level since a 25-basis point cut in February 2012.  Projected growth was revised marginally lower by bank officials.

Domestic corporate goods prices in Japan ticked 0.1% higher on month, their fourth increase in a row, but posted a 0.5% on-year drop.  Import prices were 2.5% lower than a year earlier.  Export prices sank 1.6% on year.  A depreciating yen should eventually move import price inflation into the black.

Japanese M2 money rose 3.0% on year in March and 2.9% in the year to 1Q13.  M3 money advanced by 2.5% in March and 2.4% in 1Q.  Broad liquidity was merely 1.5% larger than a year before in March. 

Japanese stock and bond transactions last week generated a JPY 2.47 trillion net capital inflow, which was even greater than the inflow of JPY 1.17 trillion in the prior week.

Core domestic machinery orders, up 7.5% in February, failed to offset January’s 13.1% plunge.  The level in January-February averaged 6.9% less than in 4Q12.  Foreign orders for machinery advanced 8.0% in February but were 4.8% lower in January-February than the average 4Q12 level.  Total machinery orders and core domestic orders recorded sharp declines of 14.8% and 11.3% between February 2012 and February 2013, while foreign orders plunged 21.0% in that span.

Australia reported weaker-than-forecast labor market data.  The 5.6% jobless rate in March was at a 3-year high and up from February’s 5.4%.  Jobs fell 36.1K in the month versus forecasts a a sub-10K dip.  The labor market participation rate slid 0.2 percentage points to 65.1%.

New Zealand’s business purchasing managers index settled back to a reading of 53.4 in March, which still connotes expansion, from 56.3 in February.  New Zealand home sales reached a six-year high, increasing 2.4% on month and by a sharper 10.9% on year.

Malaysian industrial production dropped 1.2% on month and by 4.5% on year in February.

House prices in the euro area fell less sharply in 1Q13 (0.5%) than such had in 4Q12 and recorded a diminished on-year 1.8% decline as well.

German consumer price inflation was confirmed as 1.4% in March, lowest in 27 months despite a 0.5% on-month increase.  Energy prices fell by 1.4%, while food, drink and tobacco costs went up 0.7% on month and 3.2% on year.

French consumer price inflation slowed to 1.1% in March after 1.2% in February.  Swedish consumer prices were unchanged from a year earlier in March.  Core was 0.9% higher on year.  The 12-month 2.3% rise in harmonized Hungarian consumer prices was down from a 2.9% pace in February.  Irish CPI inflation was halved to 0.5% in March from 1.1% in February.

Greek unemployment climbed to yet another record high of 27.2% in the first month of 2013.  Turkey’s current account deficit narrowed 12% to $5.13 billion in February.

Scheduled U.S. data releases today include import prices and weekly jobless insurance claims, which spiked last week.  Retail sales, producer prices, business inventories, and the U. Michigan consumer sentiment index arrive Friday.  Fisher, Plosser, and Bullard of the Fed speak publicly today. 

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

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