New Overnight Developments Abroad: Softer Dollar and Yen

February 26, 2009

The dollar rose 0.3% against the yen but lost 0.7% against the Swiss franc, 0.5% against sterling, the euro and Australian dollar, 0.4% against the Canadian dollar and 0.3% against the kiwi. Dollar/yen of 98.0 was the strongest such has been since mid-November.

Stock markets overnight have traded mixed. The Nikkei closed unchanged. Singapore’s market was also flat. Share prices plunged 5.0% in China and dropped by 0.7% in Vietnam, 1.2% in South Korea, 0.9% in Hong Kong, 0.5% in Thailand and 0.4% in the Philippines.  Stocks rose 0.6% in both Taiwan and India and by 0.8% in Indonesia. In Europe, the Ftse is up 1.0%, and the Dax and Paris Cac are 0.6% and 0.5% higher.

European sovereign bond prices are lower.  The 10-year JGB eased 2.5 basis points to 1.275%.

Oil extended yesterday’s rally, gaining another 1.8% to $43.28 per barrel.  Gold dropped 1.8%, in contrast, and at $948.90 per ounce is off more than $50 from last week’s peak.

Business investment in Australia rose 6% last quarter instead of falling as assumed. Weekly wage earnings advanced 5.5% in the year to 4Q, also showing surprising buoyancy and giving Australia’s currency a lift.  In New Zealand, household borrowing firmed 0.1% on month and by 3.8% in the year to January. Business sentiment there worsened to -41.2 from -35.

Hong Kong exports plunged by 21.8% in the year to January, their biggest drop since the year to March 1958.

The South Korean won closed at an 11-year low against the dollar.  South Korean business sentiment weakened to 68.8 from 71.7.

Real GDP in Singapore plunged 16.4% last quarter and by 4.2% from 4Q07.  These drops were much greater than anticipated.

Noda of the Bank of Japan warned of dangers if the central bank buys too many long-term assets and said that recent swings in the yen have been excessive.

Business sentiment in Italy plumbed to a record low of 63.2 versus 65.4 in January and expectations for a slight rebound.

Overall economic sentiment in Euroland of 65.4 in February was down from a downward revised 67.2 in January, 78.4 in November and the lowest since at least the beginning of 1985.  The business climate index worsened to -3.51 from -3.16 in January.  Consumer confidence fell 2 points to -33.  Industrial sentiment declined 3 points to -36.  Sentiment in services and retail fell by a point each to -23 and -19.

Euroland M3 growth slowed sharply to 5.9% in the year to January from 7.5% y/y in December.  Such went up 7.0% y/y in the Nov-Jan.  Private credit and loans decelerated to 12-month gains of 6.1% and 5.0% from 6.8% and 5.8%.  Mortgage loans went up just 1.0%, down from 4.1% in the year to last September, and corporate lending slowed to a pace of 8.8% from 9.5% in December and 12.2% in the year to September.

Blanchflower of the Bank of England sees the jobless rate exceeding 10% later this year and argued for more fiscal and monetary stimulus.  The British Nationwide house price index fell 17.6% in the year to February, its greatest drop in at least 18 years.  House prices have fallen 20.6% from a peak in October 2007 and are near to a five-year low.

German unemployment did not increase as much as feared in February, gaining 40K on top of increases of 59K in January and 35K in December. The jobless rate of 7.9% was up from 7.8% in January and a cyclical low of 7.6% in November. Jobs rose only 0.3% in the year to January, down from 12-month gains of 0.9% in December 1.4% in 3Q08 and 1.7% in 1Q08.

German regional consumer price data indicate a greater-than-assumed deceleration of inflation in February.  Such strengthens the likelihood of a 50-basis point ECB rate cut to 1.5% a week from today.

South African producer prices likewise slowed more than assumed, dropping to 9.2% in January from 11.0% in December.

An unexpected uptick in Norwegian unemployment fanned talk of another rate cut in March by the Norges Bank.

Sweden’s trade surplus narrowed 35% to SEK 6.2 billion in January, with exports plunging 8.4% below their December level.

U.S. jobless claims and durable goods orders get released at 13:30 GMT, followed at 15:00 by new home sales and the Kansas City Fed Manufacturing Index.

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


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