New Overnight Developments Abroad: Firmer Euro

February 19, 2009

The dollar fell 1.0% against the euro and sterling. It also lost 1.6% against the Australian dollar, 1.2% against the kiwi, and 0.8% against the Canadian dollar. The greenback dipped only 0.2% against the yen and 0.1% relative to the Swiss franc.

East European official reassurances have reduced anxiety about regional currencies and debt.  Poland wants to join ERM-2 to stop Zloty’s slide against the euro. Czech and Hungarian officials also are mulling actions to support their currencies.

South Korean Finance Ministry officials pronounce maturing bank debts to be manageable in 2009.

Central bank officials in China indicated reluctance to cut interest rates further.

Oil rose 4.3% to $36.10 per barrel, and gold settled back 0.4% to $974.50 per ounce.

Stocks performed better after DJIA closed above November low yesterday.  The Nikkei rose 0.3%.  Share prices also advanced 1.1% in Australia, 1.0% in China, 0.5% in Thailand, 0.5% in Malaysia, and 0.4% in The Philippines. In Europe, the Dax is trading 0.4% higher, while the Ftse and Cac40 are unchanged.

The 10-year JGB yield is 1 basis point higher after the Bank of Japan failed to cut its 0.1% overnight target rate or to raise its monthly quota of outright JGB purchases.  Instead, the central bank solidified plans to buy commercial paper and Y 1 trillion of corporate bonds and extended the period for those operations beyond mere fiscal yearend support.  The BOJ vote was unanimous, and although its actions met expectations, there was some disappointing that something more dramatic wasn’t done  like a reintroduction of quantitative easing. At a subsequent press conference, Governor Shirakawa spoke of rapid and substantial economic decline but wouldn’t say that the central bank’s expectations were bleaker than a month ago.

Japanese stock and bond transactions generated a Y 1820 billion outflow last week, following a net outflow of Y 1476 billion in the week to February 7th.

German parliament passed legislation enabling the nationalization of banks if such becomes necessary. Germany’s Chamber of Commerce revised projected 2009 growth to negative 3% after reported the most depressed business expectations since at least 1977.

The British public sector debt repayment exceeded forecasts in January.  The PSNCR surplus was Gbp 25.1 bn compared to Gbp 25.5 bn in January 2008, and the PSNB was Gbp 3.3 bn versus Gbp 13.9 bn a year earlier. Public sector net borrowings in April-January still managed to shoot up 191% from a year earlier as revenues have been squeezed by the recession. British debt equals 47.8% of GDP and is poised to climb rapidly.

The British Council of Mortgage Lenders reported a 5.2% on-year drop in gross mortgage lending in January from a year earlier to their lowest level since April 2001.  British M4 growth accelerated to 17.5% in January from a 12-month rise of 16.1% in December.

Norwegian non-energy GDP slid 0.2% last quarter, a better result than anticipated.

Australian motor vehicle sales dropped 1.1% and 16.9% on-year in January.

Italy’s trade deficit narrowed to EUR 411 million in December from EUR 1890 million in December 2007, but the deficit was 21.5% wider in full-2008 than in 2007.

The Greek 2008 current account gap of EUR 35.0 billion equaled a whopping 14.5% of its GDP.

Dutch consumer confidence held steady at a very depressed level of -30 in February versus -10 a year earlier.

Thai exports plunged 26.5% in the year to January, nearly twice as much as the decline in December.

The United States reports jobless claims and producer prices at 13:30 GMT and the Philly Fed index and leading economic indicators at 15:00 GMT.

Copyright 2009 Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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