Firmer Yen
January 9, 2018
The Japanese yen advanced 0.4% overnight against the dollar and by even more versus main European currencies. Investors reacted after the Bank of Japan bought fewer 10-year and longer JGBs in its operations today, which kindled suspicion the quantitative stimulus may be throttled back in 2018.
The Japanese Nikkei-225 share price index climbed 0.6%, but other stock markets in the Pacific Rim made mostly trivial overnight movements. European stocks continued to rally, gaining so far today by 0.5% in France, Italy and Spain, 0.4% in the U.K. and Switzerland and 0.2% in Germany.
Apparently in response to undesirable yuan gains recently, the Peoples Bank of China modified how it sets the daily currency reference rate, and the yuan today fell back 0.5% against the dollar.
The Swiss franc also lost 0.5%, and the euro and sterling fell 0.3% each against the U.S. currency.
The 10-year German bund yield edged down 2 basis points. In futures trading, however, the 10-year Treasury moved a basis point away from the key 2.50% level.
Two Federal Reserve District Presidents, Rosengren of Boston and Williams of San Francisco, spoke about rethinking how the central bank targets inflation. Rosengren favors a target range rather than the current 2.0% point objective. Williams would like to target a price level, which would mean tolerance for inflation above 2.0% to offset years of undershooting the goal.
U.S. small business sentiment, which jumped 3.7 points to a reading of 107.5 in November seemingly in response to the tax reform bill, fell back to a two-month low in December of 104.9, which is lower than its level in January 2017 when Trump was inaugurated as the 45th president of the United States. He campaigned on a pledge to help small businesses with lower taxes and deregulation.
Japanese consumer confidence settled back 0.2 points to a 2-month low of 44.7 in December. Readings in the final months of 2016 and 2015 had been 43.0 and 42.4, respectively. On-year growth in Japanese wages reaccelerated in November to 0.9%, same as in September, from 0.2% in October. The 0.1% 12-month rise in real labor cash earnings remained meager, however, at 0.1%.
Unemployment in the euro area dipped to 8.7% in November from 8.8% in October, 8.9% in September and 9.0% in August, and it was 1.1 percentage points lower than in November 2016.
After a 1.4% decline in October, German industrial production rebounded much more sharply in November (3.4%) than had been forecast. Production exceeded the year earlier level by more than 5.5%, and the average level in October-November was 0.7% above the 3Q mean.
The German current account surplus widened to EUR 25.4 billion in November from EUR 18.8 billion in October and was also slightly greater than its year-earlier EUR 24.9 billion size. The average seasonally adjusted merchandise trade surplus in October-November of EUR 21.2 billion exceeded the 3Q average of EUR 20.9 billion per month and the 2016 mean of EUR 20.7 billion per month.
Swiss unemployment dipped 0.1 percentage point to 3.0% in December. Swiss retail sales volume in November was 0.2% lower than a year earlier.
The French current account deficit widened 27% on month to EUR 3.3 billion in November. Italy’s jobless rate slid 0.1 percentage point to 11.0% in November.
Australian building permits were 17.1% greater than a year earlier on a seasonally adjusted basis and posted an 8.1% rise in unadjusted terms.
On-year growth in Turkish retail sales accelerated in November to 4.1%.
Canadian housing starts and the U.S. Labor Department’s monthly JOLTS index get reported today. The National Bank of Poland is holding a monetary policy review.
Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Japan, German current account and industrial production, Peoples Bank of China, U.S. small business sentiment