Dollar Drops Against Yen, Yuan and Peso

January 5, 2017

The dollar fell overnight by 1.3% against the Mexican peso, 0.7% relative to the Japanese yen and 0.6% vis-a-vis the Chinese yuan. The U.S. currency also lost 0.2% to the Swiss franc and 0.1% versus the euro, loonie and Australian dollar but rose 0.3% against sterling and 0.1% relative to the kiwi.

Share prices climbed 1.5% in Hong Kong, 1.1% in Singapore, 0.9% in India and 0.8% in Taiwan but slipped 0.4% in Japan and 0.2% in South Korea. The German Dax and Paris Cac are off 0.2%, while the British Ftse is flat.

10-year sovereign debt yields rose four basis points in the U.K. and 2 bps in Germany but dipped a basis point in Japan.

Gold and WTI oil are up 0.7% each at $1,173.80 per ounce and $53.63 per barrel.

FOMC minutes released yesterday afternoon expressed uncertainty about the composition and impact of fiscal policy under President Trump’s administration. While warning of the possible need for a steeper incline of U.S. interest rates, the minutes also flag the stronger dollar as a potential negative factor on future growth.

Producer prices in Euroland provided more evidence of rising global inflation. The PPI increased 0.3% in November, as energy went up 0.7% and all other producer prices collectively posted a 0.2% advance. On-year inflation turned positive, printing at +0.1% versus -0.4% in October and -3.1% at mid-2015.

Today’s batch of purchasing manager surveys corroborated other indications that economic activity is picking up in many places.

  • Japan’s services PMI score of 52.3 in December was 0.5 points better than November’s reading and lifted the composite PMI to a 16-month high of 52.8.
  • China’s composite PMI did even better, reaching a 45-month peak of 53.4 versus 52.9 in November. China’s services PMI was at a 17-month high of 53.4 according to the Caixin measure.
  • Private PMI readings of 51.6 in South Africa and 50.3 in Hong Kong constitute 21- and 22-month highs.
  • But Singapore’s private PMI slipped back to a 2-month low of 52.0 in December from 52.8 the month before.
  • Australia’s Performance of Services index leaped 6.6 points to a 115-month high of 57.7, signaling a strong pace of improvement in business conditions. As recently as September, the reading had been at a sub-50 level.
  • The British services and composite purchasing manager indices climbed to 17-month highs in December of 56.7 and 56.2. In July right after the Brexit vote, such were at 47.5 and 47.4.
  • Ireland’s services PMI of 59.1 indicated the fastest improvement of conditions in four months.
  • Euroland’s retail PMI rose 1.8 points to a 4-month high of 50.4 in December. The German and French retail PMIs of 52.0 and 50.4 were at 3- and 4-month highs (November, by contrast, had experienced a drop to 10- and 8-month lows below 50). Italy’s December retail PMI, however, slid 0.9 points to a 2-month low of 47.9.

Japanese motor vehicle sales recorded on-year growth in October-November of 11.3%, up from 2.2% in September-October.

British new car sales were 1.1% lower last month than a year before.

U.S. motor vehicle sales edged up 0.4% in 2016 to 17.55 million, another record.

Japan’s monetary base grew 25% last year, down from a 34% rise in 2015. December monetary base was 23.1% above its year-earlier level.

In the year to December, harmonized Dutch consumer prices rose 0.7%, but their Swiss counterpart fell 0.2%.

Mixed U.S. labor market figures were released:

  • New jobless insurance claims fell 28K to 235K in the final week of 2016. This was the 96th straight week with such below 300K, the longest streak since 1970.
  • Continuing jobless insurance claims increased 71K to 2.112 million and exceeded expectations.
  • ADP’s monthly estimate of employment growth in December was just 153K, some 20K less than expected.

Producer prices in Canada rose 0.3% in November and were 1.4% higher than a year earlier. Raw material prices posted a 4.1% on-year increase.

Still to come: The ISM purchasing managers survey for U.S. non-manufacturing and minutes of the ECB’s December Governing Council Meeting, which goes by the name ECB Account.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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