New Overnight Developments Abroad: Weaker Pound and Dollar

September 24, 2009

The dollar climbed 1.0% against sterling but has lost 0.8% relative to the yen, 0.6% against the kiwi, 0.5% versus the Aussie dollar and Swiss franc, 0.3% against the euro and 0.1% against the Canadian dollar.  Reactions to yesterday’s FOMC statement are muted, as there were no major surprises or new initiatives.  Attention now turns to the Pittsburgh summit of G-20 leaders starting today and ending tomorrow.

The Nikkei gained 1.7% as Japanese markets opened for the first time this week.  Elsewhere in the Pacific Rim, stocks fell 2.5% in Hong Kong, 1.0% in South Korea, 1.3% in Vietnam, 0.7% in Taiwan, Singapore and Australia and 0.8% in Sri Lanka.  Equities rose by 0.7% in China, 0.5% in Indonesia, and 0.4% in India.

The ten-year JGB yield slid 2 basis points to 1.33%.  Bund and gilt yields fell by 4 and 3 basis points.

Crude oil prices fell 0.5% to $68.64 per barrel.  Gold edged 0.1% higher to $1015.20 per ounce.

Japanese exports and imports recorded continuing large on-year declines in August, falling by 36.0% and 41.3%.  The customs trade surplus was Y 186 billion compared to a Y 314 billion deficit a year earlier.  The surplus in trade with the EU collapsed 86.5%, and those against Asia and the United States fell by 30.2% and 26.7%.  A 58.7% drop in mineral fuel imports accounted for the on-year improvement of the trade balance.

Japanese supermarket sales in August were 3.4% lower than a year earlier.  Clothing sales led the decline.

Japan’s all-industry index posted a fourth straight monthly advance, gaining 0.5% in July despite a 3.1% drop in construction.  Industrial production and services gained 2.1% and 0.6% in the latest month.  The all-industry index had risen 0.4% last quarter but posted an unchanged 8.2% on-year decline in July.

The IFO index for Germany’s business climate improved less than anticipated in September, printing at 91.3 after 90.5 in August and 87.4 in July.  The low point in March had been a reading of 82.2.  September’s score was the best in a year.  Both the current situation component (87.0) and the expectations component (95.7) rose somewhat in September.  Construction suffered a slight setback, but manufacturing, wholesaling and retailing advanced in September.

The IFO services index also went up in September, rising to 3.8 from 1.4 in August, minus 3.0 in July and minus 10.0 in March.

Dutch GDP growth in the second quarter was revised to a bigger drop of 1.1% from 0.9% reported initially.  GDP was 5.4% lower than in 2Q08.

Dutch business sentiment worsened in September to minus 9.8 from minus 9.3 in August.  Consumer spending fell 2.1% in July.

The Italian trade balance swung to a EUR 4.107 billion surplus in July, much more than forecast, from a EUR 0.639 billion deficit in June.

The Central Bank of Taiwan’s benchmark interest rate was left at 1.25% as expected.  Other central bank rate announcements today are awaited in the Czech Republic, Hong Kong, and Israel.  The Bank of Israel remains the only central bank to have begun lifting rates after lowering them sharply during the recession.

Hong Kong posted a better-than-forecast HK$ 21.8 billion trade surplus in August even though exports fell more than imports.

Swedish producer prices slid 0.9% in August.  The domestic component edged 0.2% lower, while export and import prices dropped by 1.8% and 1.0%.  Swedish consumer confidence rose to 5.6 in September from 3.1 in August.  Business sentiment improved to minus 5 from minus 9 in August and minus 15 in July.

Austrian industrial production fell by 0.9% in July and was 10.6% lower than a year earlier.  Slovenian sentiment rose to minus 17 in September from minus 22 in August.

A report in the Telegraph newspaper claims that top British economists have been summoned to the Bank of England next Tuesday to brainstorm quantitative easing.

Brazilian consumer confidence rose 4.2% in September.  Mexican retail sales fell 4.8% in the year to July.

The ECB September Bulletin published a new money market survey highlighting stabilization.  ECB policymaker Quaden urged wide-ranging financial market reforms.  Bank of England Governor King warned it will take quite a while for bank balance sheets to get fixed.  RBNZ Governor Bollard said there is not much the central bank can do to stop kiwi appreciation, which is a threat to the recovery.

U.S. weekly jobless insurance claims and monthly existing home sales data get released today.

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


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