New Overnight Developments Abroad: Dollar and Yen Lower

July 15, 2009

The dollar is mostly lower, and stocks have risen following better-than-expected corporate quarterly earnings announced yesterday.

The dollar lost 1.0% against the kiwi and Australian dollar, 0.9% relative to the Swiss franc, 0.8% against the euro, 0.5% versus sterling,and  0.4% against the Canadian dollar.  The U.S. currency is 0.1% higher against the yen.  The euro is back above $1.4000.

Stocks gained 3.2% in Indonesia, 3.4% in Singapore, 2.9% in India, 2.6% in Taiwan, 2.1% in Hong Kong, 1.8% in Thailand, 1.5% in Australian and 1.0% in the Philippines.  In Europe, the German Dax, Paris Cac and British Ftse show strong advances of 1.9%, 1.7%, and 1.5%.

Most sovereign bond yields have increased, including a 1-basis point rise in 10-year JGBs to 1.35%.

Oil and gold climbed by 1.6% to $60.49/barrel and 0.7% to $929.50 per ounce.

Bank of Japan policy board members sprung no surprises, retaining a target interest rate of 0.1%, where such has been since December, but also unanimously agreed to extend temporary credit-easing programs by three months.  New quarterly macroeconomic forecasts were released, reducing projected fiscal 2010 growth to a range of 0.6-1.1% and the point projection for growth this fiscal year to minus 3.4% from minus 3.1%.  The economic assessment is guardedly hopeful.

As expected, the Bank of Thailand left its one-day RP rate at 1.25%, called that level accommodative, but left the door open for future cuts if needed.  After four reductions totaling 250 basis points, the key rate is now at its lowest level since mid-2004.

China reported a hugely unexpected $178 billion 2Q jump in reserves to $2.132 trillion and a strong acceleration of money and credit growth in June.  M1 advanced 24.8% from June 2008, after on-year growth in May of 18.7%.  M2 rose 28.5%, up from 25.7%.  Yuan lending shot up 34.4%, up from 30.6%.  Foreign direct investment into China fell 6.8% in the year to June, suggesting the increase in reserves embodies considerable inflows of hot money.

Final Euroland consumer price data for June confirm such rose 0.2% from May but eased 0.1% from a year earlier.  Core inflation unexpectedly eased to 1.3% from 1.5% in May and 2.5% a year earlier.  Energy prices fell 11.8% in the year to June versus a rise of 16.1% in the year to June 2008.  Food slid 0.2% y/y versus an advance of 6.4% in the prior statement year.  Total consumer prices had increased 4.0% in the year to June 2008.

Italian consumer prices firmed 0.1% and 0.5% on year in June.

British unemployment according to the claimant count rose 23.8K in June, about half of what analysts expected and the smallest rise since May 2008.  The jobless rate ticked up a tenth to 4.8% on the claimant data and to 7.6% in March-May on the ILO calculation from 6.7% in the previous three months.  Average earnings growth remained very benign at +2.3% in the year to March-May.

Singapore retail sales in May firmed 0.8% m/m but fell 10.3% on year after a drop of 11.7% in the year to April.

Swiss retail sales fell 1.4% in the year to May, showing weakness compared to a 0.5% increase in January-May from a year earlier.

Czech producer prices fell by 0.4% in June and by 4.4% from June 2008.

Spanish house prices fell 8.2% in the year to 2Q09, their sharpest drop since at least 1987.

South African retail sales fell 4.2% in the year to May, their fourth on-year drop in a row.

Australia’s index of leading economic indicators, compiled by Westpac, slid two-tenths of a point to 248.2, the first decline in three months, but the index of coincident indicators firmed by the same amount.  The New Zealand prime minister added his voice to predictions that recovery is close at hand.

Consumer confidence in Hungary improved for a third straight month but remained very weak at minus 63.1 in July.

Charles Bean, Deputy Governor of the Bank of England, hinted that the government is prepared to authorize a bigger ceiling on the central bank’s asset purchases.

European car sales rose 2.4% in June, the first increase in 14 months.

A plane crash in Iran has killed 168 people.  A tsunami alert in New Zealand has been made following a 7.8 earthquake under the ocean.

The U.S. will release consumer prices, industrial production, the FOMC minutes, and the Empire State factory index later today.  Canada’s monthly manufacturing survey results are due too.

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


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