New Overnight Developments Abroad: Dollar Lower Despite Supportive Bernanke Remarks

May 12, 2009

Fed Chairman Bernanke predicted the dollar would remain the main international reserve currency because the U.S. economy will be strong and the central bank is committed to price stability.

The dollar nonetheless lost 1.1% against sterling, 0.7% against the kiwi, 0.6% versus the Aussie dollar, 0.5% against the Canadian dollar and euro, 0.4% against the Swiss franc, and 0.1% relative to the yen.

Stocks are mixed, falling 1.6% in Japan, 1.2% in Australia and 0.8% in South Korea but rising 2.3% in China, 4.1% in India, 2.4% in Vietnam, and 0.7% in Germany. The Paris Cac is unchanged and the Ftse has edged 0.1% higher.

Ten-year yields on bunds, gilts, and Treasuries are higher.  The ten-year JGB yield is unchanged on net at 1.455%.

Oil and gold prices are up 1.5% and 0.6% at $59.36/barrel and $919.10/ounce.

Australian Finance Minister Swan presented the annual budget.  It did not embody a third major stimulus package but still showed record deficits to 2016. GDP is seen contracting 0.5% in FY09/10 but recovering to 2.25% in FY10/11 and 4.5% in FY11/12.  Unemployment crests at 8.5% in FY10/11 when the current account gap reaches 5.75%.  This fiscal year’s deficit of A$ 53.1 billion equals 4.5% of GDP.

The Bank of Korea left the 7-day repo rate unchanged at 2.0% and indicated no rate hikes are likely in 2009.  The rate was cut six times from October 9 to February 12 from a peak of 5.25%.  The central bank believes the recession moderating.

Kazakhstan’s refinancing rate was reduced 50 basis points to 9.0%.  Tajikistan‘s refinancing rate was slashed by 200 basis points to 10%.

British industrial production fell 0.6% in March and by 5.3% last quarter.  On-year declines amounted to 12.4% in March and 12.1% in 1Q.  The U.K. trade deficit narrowed in March to Gbp 6.589 billion for goods only and Gbp 2.537 billion for goods and services.  Real export and import volumes each plunged nearly 10% in the first quarter.  Same-store retail sales rebounded 4.6% in April, and total sales posted the best advance (6.3%) since April 2006, but these data from the British Retail Consortium were distorted by a late Easter.  The RICs house price balance improved to -59.9 in April from -72.0, best in 15 months.  The DCLG house price index fell 13.6% in the year to March after a 12.3% on-year drop in February.

Indian industrial production sank 2.3% in March, worst in at least 16 years.

China’s trade surplus narrowed in April to $13.1 billion from $18.6 billion in March as exports fell 22.6% y/y, following a 17.1% drop in the year to March.  The data give pause to the view that China is clearly mending.  On the other hand, fixed asset investment accelerated to a robust 30.5% on-year increase in January-April from 28.6% in 1Q.  Corporate goods prices fell 7.1% in the year to April, after posting a drop of 6.6% in March.  Such had risen 8.2% in the year to Aug 2008.

Hong Kong real exports sank 20.1% in the year to March.

Japan’s index of leading economic indicators improved 2.1 points in March and recorded the best diffusion index score (30) since mid-2008.  Japanese stock and bond transactions generated a Y 274 billion inflow last week after a Y 954 billion outflow in the week to April 25.  Japanese reserves fell $7.076 billion in April after increasing by $9.195 billion in March.

Home financing in Australia rose 4.9% in April, about as much as forecast.  Home sales in New Zealand rose 39.6% y/y in April, but prices were 1.4% lower.

The Bank of France projected that French GDP will drop by 0.6% not annualized in 2Q09.  The central bank also announced a one-point rise in industrial business sentiment to 75.  France’s budget gap was 94% greater in 1Q09 than 1Q08 due to a 26% plunge in revenues.  Spending increased 2.7%.

German wholesale prices ticked up 0.1% in April but fell by 8.1% from April 2008.  The preliminary estimate for April consumer prices (no change on month and a 0.7% increase on year) was left unchanged.

U.S. and Canadian trade data will be reported at 12:30 GMT.

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


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