New Overnight Developments Abroad: Modest Currency Changes

September 17, 2009

The dollar is narrowly mixed with dips of 0.3% against the Canadian dollar and 0.2% versus sterling, no change against the euro, and gains of 0.3% against the kiwi, 0.2% against the Australian dollar, and 0.2% relative to the Swiss franc and yen.

Ten-year bund, gilt, and JGB yields are up 5, 4, and 2 basis points.

Stocks in the Pacific Rim and Europe are mostly higher.  Advances amounted to 1.7% in Japan and Hong Kong, 1.4% in Australia, 1.9% in China, 2.1% in Sri Lanka, and 1.1%  in New Zealand.  In Europe, the Ftse, Dax, and Cac40 are 0.8%, 0.6%, and 0.5% higher.

Gold and oil prices are firm but not higher at $1019.20 per ounce and $72.51 per barrel.

The Bank of Japan unanimously voted to keep its target overnight rate at 0.1% despite upgrading its economic assessment to “showing signs of recovery.”  BOJ Governor Shirakawa and Board member Yamaguchi stressed continuing downside growth risks with high uncertainty.  Positive growth is expected to start next quarter.  A rate increase in Japan is not yet on the radar screen.

BOJ Governor Shirakawa echoed remarks by the new Finance Minister Fujii that seemed to endorse a stronger yen in the long run but hedged his remarks, saying that foreign exchange stability is desirable.

Japan’s tertiary index, a gauge of service sector activity, went up 0.6% as expected in July to a five-month high and were 5.4% lower than in July 2008.  Japanese land prices recorded an 18th consecutive on-year drop in July, falling 4.4%.

Japan’s Ministry of Finance released quarterly business sentiment figures that showed big improvements in 3Q09 from the second quarter.  The indices rose to 0.3 from minus 22.4 for big firms, to minus 15.7 from minus 37 for mid-sized firms, and to minus 36.7 from minus 49.6 for small firms.  Additional gains are expected by yearend.

The euro area trade surplus widened to 6.8 billion euros on a seasonally adjusted basis in July from EUR 2.3 bln in June and EUR 1.5 bln in May.  In unadjusted terms, such more than doubled to EUR 12.6 billion from EUR 5.4 billion in June and a deficit of EUR 3.5 billion a year earlier.

Construction output in Euroland unexpectedly sank 2.0% in July and by 10.8% from a year before after dropping 8.8% in the year to June.

British retail sales were unchanged in volume terms in August and posted a smaller 2.1% on-year advance after climbing 2.9% in the year to July.  A 1.3% drop in clothing was the main depressant, while sales at food stores went up 0.7% on the month.  Overall retail sales were 1.2% higher in June-August than in March-May, the best 3-month rise in 14 months.

The Bank of England released a survey of inflation attitudes compiled in conjunction with GFK NOP, updating a prior survey last May.  There was only marginal, if any, improvement.  The Institute for Fiscal Studies warned of the sharpest British public spending cuts next financial year since 1976.

Job vacancies in the British financial sector jumped 18% in August.

The British CBI monthly survey of industrial trends showed continuing improvement in September, rising to an 8-month high of minus 48 from minus 54 in August and minus 59 in July.

Canadian consumer prices rose 0.3% seasonally adjusted last month, reversing July’s 0.3% drop.  The 12-month decline of consumer prices amounted to 0.8% in August after a drop of 0.9% in the year to July.  Energy prices fell 19.1% from August 2008, while non-energy prices rose 1.4%.  The core CPI index targeted by the Bank of Canada at 2% fell to 1.6% in August from 1.8% in July.  Canada later today releases the index of leading economic indicators.

The Swedish unemployment rate in August was 8.0% compared to 5.2% a year earlier.

New Zealand’s factory index suffered its first setback in three months, dipping to 48.7 in August from 49.6 in July.

Australia’s industrial trends index rose to 48.2 in the third quarter from 38.3 in 2Q09.

The Swiss National Bank is holding its quarterly monetary policy meeting today.  Turkey also will have an interest rate decision.

U.S. data releases today include housing starts, weekly jobless claims, and the Philly Fed index.  Markets continue to focus also on next week’s G-20 leaders summit in Pittsburgh.

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


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