New Overnight Developments Abroad: Commodity Currencies Firmer

May 5, 2009

The Canadian dollar hit 1.1702 per USD today, its strongest level of 2009.  The rand touched a 7-month high of 8.2621/USD and is up around 15% since end-2008.  The U.S. dollar is trading down 1.0% against the kiwi and 0.6% against the Australian dollar after the Reserve Bank of Australia kept its cash rate unchanged at 3.0% and released a statement that expressed more optimism about recovery prospects and conveyed no signal about future interest rate moves.  Stress test results are expected to be announced by officials on Thursday, coinciding with the Bank of England and ECB rate announcements that day.

The dollar dropped 0.6% against sterling after hitting a low of 1.511/Gbp.  Britain’s construction PMI unexpectedly jumped 7.2 points to 38.1 in April.

The dollar firmed 0.3% against the yen, 0.2% against the Swissy, and 0.1% against the euro.

Reports surfaced that 10 of 19 U.S. banks are being asked to raise more capital.  Question now is whether investors conclude that the required increases are manageable.  Yesterday’s rally in financials suggested the answer will be affirmative.  However, S&P said it may lower counter-party ratings of 22 financial firms.

In Asian bourses, stocks rose 3.0% in Thailand, 2.8% in The Philippines, 2.1% in South Korea, 1.5% in Sri Lanka, and 0.5% in China, but such fell by 0.9% in Indonesia and 0.3% in India.  The British Ftse shot up 3.1% in response to the much better PMI-construction report than had been anticipated.  The Dax and Paris Cac are up 0.4% and 0.6%.

Oil settled back 0.3% but is trading above $54/barrel.  Gold is holding its ground just above $900/ounce.

Japanese markets remain shut for the Golden Week holidays.  Today is Children’s Day there.  Mexico is closed for Cinco de Mayo.

Swedish Riksbank minutes from the April 20th meeting that halved its repo rate to 0.5% indicated one policymaker wanting a 75-bp cut and a possibility of a further reduction to 0.25%.  As at other central banks, officials are worried about damage to financial markets if rates are cut too low and are looking into that issue.  Quantitative easing was deemed unnecessary as yet but a future possibility if economic conditions worsen.

Australia’s services-PSI index increased 4.3 points to 39.8 in April.  Building approvals in Australia recovered 3.5% in March but were 16.5% lower than a year ago.  Motor vehicle sales fell 23.9% in the year to April.  In neighboring New Zealand, car sales tumbled 36.5% in the year to March.

Euroland producer prices fell 0.7% in March and by 3.1% on year, a swing of 9 percentage points from the 12-month rise of 5.9% last October.  Energy prices fell 1.7% in March, while non-energy producer prices dropped by 0.4%.  Such recorded 12-month declines of 7.3% and 1.7%.  Producer prices tumbled 12.2% at a seasonally adjusted annual rate in the first quarter.

Norway’s PMI-manufacturing index improved to 39.8 in April from 38.0 in March.

Russian CPI inflation decelerated by more than expected to 13.2% y/y in April from 14.0% in March.

Bank Indonesia cut its key interest rate by another 25 basis points to 7.25% as expected and hinted that more reductions lie ahead.  This was the sixth cut since October 7 from a prior cyclical peak of 9.5%.  The rate was also cut by 25 basis points in April after three 50-bp reductions during 1Q09.

South African unemployment increased further to 23.5% last quarter from 21.9% in 4Q08.  Motor vehicle sales fell by 43.7% in the year to April and 36.4% in the year to 1Q09.

German car sales rose 19.4% in the year to April, continuing their strong uptrend.  Note that yesterday’s disappointing retail sales data excluded car sales.

Consumer price inflation in The Philippines slowed to a 12-month pace of 4.8% in April from 5.0% in March, as core dropped to 5.0% from 5.6%.  Inflation is at a 16-month low, and the Philippine central bank is expected to ease monetary policy later this month.

A top official at the Swiss National Bank said a business cycle turning point may be nearing.

U.S. weekly chain store sales get released later today followed by the ISM-services index at 14:00 GMT.  Fed Chairman Bernanke testifies before the Joint Economic Committee at that hour, and Fed regional presidents Stern and Yellen speak publicly today.

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


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