New Overnight Developments Abroad: Dollar Sets 2009 Highs Against Yen and Euro

March 4, 2009

The dollar touched Yen 99.48 and 1.2459 per euro, each constituting the greenback’s highest levels of 2009.

The dollar is mixed overall, gaining 1.1% against the4 yen, 0.5% against the euro, and 0.4% against the Swissy but also losing 0.8% against the kiwi, 0.4% against sterling, 0.3% against the Australian dollar and 0.2% against the Canadian dollar.

The Ukraine hryvnia recovered 6.5% on announced budget modifications to comply with IMF loan conditions.

Talk of more fiscal stimulus by Beijing and some better-than-expected Chinese data spurred a stock market rebound in Asia.  China’s market rallied 6.7%. Other gains were 3.6% in Pakistan, 3.3% in South Korea, 2.5% in Hong Kong, 1.9% in Indonesia, 1.2% in Vietnam, and 0.9% in Japan.  European bourses are higher, too: Germany up 2.8%, France up 2.2% and Britain +1.9%.

Ten-year bund, gilt, and JGB yields firmed.

Oil advanced 3.9% to $43.29 per barrel. Gold slid 0.4% to $910.4 and is now almost $100 per ounce below its recent peak.

The composite euro area PMI was at a record low in February of 36.2 after 38.3 in January and 52.8 in February 2008.  The service PMI was 39.2, also a survey low but above the flash indication of 38.9.  Germany posted a composite PMI score of 36.3, down from 38.0 in January and a new survey low.  The services PMI for Germany was 41.3, down from 45.2.  The French PMI readings were at 36.7 after 40.4 on the composite and 40.2 after 42.6 on services.  Italy had a service PMI of 37.9, a survey low as in Euroland, Germany and France and down from 41.1 in January.  Spain’s PMI-services edged a tenth lower to 31.7 but remained above November’s all-time low of 28.2. The Irish PMI in services hit a record low of 31.8 after 33.9 in January.

The British service sector PMI unexpectedly improved for a third consecutive time to 43.2 from 42.5 in January, 40.2 in December and 40.1 in November. This trend suggests a flattening in the rate of contraction, whereas Euroland figures point to bigger negative growth in 1Q09 than 4Q08.

The British Retail Consortium reported a 1.9% on-year rise in shop prices last month, up from 1.1% in January and 0.5% in December.  The Nationwide measure of U.K. consumer confidence rebounded to 43 in February from a series low of 41 in January but remained well below December’s 48 reading or October’s 55. Job vacancies in Britain fell at an accelerating pace in February.

China’s PMI-manufacturing index improved again to 49.0 in February from 45.3 in January and a recent and record low of 38.8 in November. The non-manufacturing PMI reading was lower, however.

Bank of Japan policymaker Suda depicted a poor economic outlook but warned against a return to quantitative easing.

One day after the Reserve Bank of Australia surprised markets by not cutting rates, much worse-than-expected GDP data were released in that economy.  Real GDP fell 0.5%, the first drop in 8 years and three-fourths of a percentage point lower than assumed.  On-year growth slowed to 0.3% from 1.9% in 3Q08 and 2.7% in 2Q08.  Analysts had expected the 12-month rise to slightly exceed 1%.  Consumption and investment each rose only 0.1%. Residential construction and exports fell by 1.2% and 0.8%.  Net foreign demand enhanced growth by about 1.5 percentage points but was offset by an inventory drag.  Now investors will spend a whole month discounting a rate cut in April but complaining that such had been done this week.

New Zealand car registrations slumped 38.5% in the year to February.

Romanian GDP growth slowed to 2.9% year-on-year in 4Q08 from 9.2% in 3Q08.

German real plant and equipment orders fell by a record 42% in the year to January.  Russia’s PMI-services index bounced to 40.0 from 36.8 in January.

Bank Indonesia cut its benchmark rate by 50 basis points, the top end of expectations. Such was the fourth reduction since November.  The key rate falls to 7.75% from a prior peak of 9.5%.

Today the U.S. releases ADP private-sector jobs, the service-sector PMI, energy inventories, the Fed Beige Book and mortgage applications.  Geithner testifies further, and a couple of Fed officials speak publicly as well. Tomorrow sees likely 50-bp rate cuts in Britain and Euroland plus, and another horrific drop in U.S. jobs will be Friday’s focus.

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


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