New Overnight Developments Abroad: New Era in Yen Management Begins

September 16, 2009

The dollar has fallen 1.0% against the kiwi and 0.8% against the Australian dollar and yen.  The kiwi and Aussie hit new 2009 highs of USD 0.7140 and USD 0.8729.  Japan’s DPJ-led cabinet was announced, including Fujii as finance minister, Kamei and banking minister, Hirano as chief cabinet secretary and Hatoyama as prime minister. Fujii opposes efforts to rein in yen strength and intends to promote a rotation of growth away from exports and toward consumption.

The dollar also slid 0.4% against the Canadian dollar and 0.1% relative to sterling and the euro.  It firmed 0.1% against the Swiss franc.  The Swiss National Bank holds its quarterly interest rate meeting tomorrow and is not expected to change its 0.25% key rate target.

Asian and European stocks climbed mostly in continuing response to upbeat remarks yesterday from Bernanke and Buffet.  Gains amounted to 2.6% in Hong Kong, 1.8% in Taiwan, 1.4% in Singapore, 1.7% in Sri Lanka, 1.0% in Thailand, 2.4% in Australia, 1.2% in Pakistan, Britain and France, 0.8% in Germany and 0.5% in Japan.

Gold shot up another 1.4% to $1020.70 per ounce. Oil is holding above $70 but has settled back 0.2% to $70.77 per barrel.

Ten-year bund and gilt yields slid one basis point, while the 10-year JGB yield firmed one bp to 1.33%.

British labor statistics were released.  The unemployment claimant count went up 24.4K in August, near expectations and July’s 25.3K rise.  The jobless rate ticked up a tenth on a claimant count basis to 5.0%.  On the ILO basis, joblessness advanced to 2.47 million, highest since 1995, and to 7.9% in May-July from 5.5% a year earlier and 7.2% in February-April.  The rate of wage increase decelerated to 1.7% in the latest three months to July from 2.5% in 2Q.  There was an on-year advance of just 1.0% in the single month of July.  Productivity fell 4.2% in the year to 1Q09, as unit labor costs rose 3.6%.

Consumer prices in Euroland rose 0.3% last month and fell by 0.2% from August 2008.  On-year inflation in July had been minus 0.7%.  Core inflation remained steady at 1.2% and compared to 2.6% in the year to August 2008.  A 1.8% jump in energy prices accounted for August’s month-over-month rise in the CPI.  Non-energy consumer prices firmed just 0.2%.

Switzerland’s ZEW expectations index advanced sharply to 58 in September from 18.6 in August.  Retail sales rose 1.0% in July.

Australia’s index of leading economic indicators posted a 1.1% monthly rise in July and a smaller 1.8% on-year drop after falling 4.6% in the year to June.

Austrian consumer prices firmed 0.4% m/m and 0.3% y/y in August.  Malaysian consumer prices dropped 2.4% in the year to August but were 1.3% higher than a year earlier in January-August.

South Korean unemployment held steady at 3.8% in August.  Slovenian unemployment rose three-tenths to 9.4% in July.

Italy’s current account deficit was three times wider in July at EUR 3.334 billion than in June.

Investors await several U.S. data releases today: industrial production, consumer prices, mortgage applications, the quarterly current account, the NAHB index, and Treasury’s monthly capital flow figures.  Canada releases its monthly report on manufacturing sales, orders, and inventories.

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


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