New Overnight Developments Abroad: Dollar Broadly Lower And Gold Gained Further

October 8, 2009

The dollar has lost 1.5% against the Australian dollar, 0.7% versus sterling, 0.6% relative to the euro, kiwi, and Swiss franc and 0.5% against the Canadian dollar.

Bank of England policy was not changed.  The Bank rate holds at 0.5%, and the asset buying ceiling through November stays at Gbp 175 billion.

Markets await the ECB policy announcement at 11:45 GMT and do not expect any changes.  Press conference at 12:30 GMT may produce a comment on recent dollar weakness or remarks about an eventual exit strategy.

Gold hit another record high, this time of $1055.60 per ounce, and is up 1.0% on balance. Oil also is trading 1.0% higher at $70.28 per barrel.

Stocks kept climbing, gaining 1.6% in Australia, 1.1% in South Korea, 1.0% in Vietnam, 0.9% in New Zealand and Malaysia, 1.2% in Hong Kong but just 0.3% in Japan.  In Europe, the Dax and Paris Cac are 1.2% higher, while the Ftse has risen 0.6%.  The yield on 10-year Gilts eased 2 basis points to 3.36%, while the 10-year JGB yield stayed at 1.27%.

Peru’s central bank left its benchmark rate unchanged as expected at the record low of 1.25%.

On the heels of Australia‘s surprise rate hike earlier this week came news overnight of an unexpected drop in unemployment to 5.7% in September from 5.8% in August and a jump in jobs of 40.6K after a drop of 26K the month before.  Most of the growth in jobs was in full-time workers, up 35.4K.  Analysts had predicted a 5.9% jobless rate with employment off 10K.  These data sent the Aussie dollar over 90 U.S. cents to a 14-month high of $0.9048.

Japan’s economy watchers index, a gauge of service sector workers’ sentiment, improved to 43.1 in September from 41.7 in August and a low-point of 15.9 last December.  Like other diffusion indices, readings below 50 constitute a negative view.  Japanese Prime Minister Hatayama is said to be considering tax breaks for low wage earners.

Japan’s August current account surplus of Y 1171 billion was 10.4% wider than a year earlier and near expectations.  Merchandise exports posted another disappointing on-year drop of 37.1%, similar to July’s drop of 37.6%.  The seasonally adjusted current account surplus rose 6.4% between July and August to Y 1234 billion.  Portfolio and direct investment outflows roughly offset August’s current account surplus, producing a Basic Balance shortfall of Y 79 billion.

Stock and bond transactions between Japanese residents and others generated a Y3.053 trillion outflow in September, the final month of the fiscal half.

Japanese machine tool orders in September were 62% lower than a year earlier.  Corporate bankruptcies fell 15.7% in the year to September, and associated liabilities were 93% smaller.

German industrial production advanced 1.7% in August but was 16.2% lower than a year earlier.  These results conform to market expectations and follow yesterday’s reported jump in orders of 1.4%.  Factory output rose 2.0% last month, led by a 3.4% increase in intermediate goods.  Construction went up 4.2%.

The Bank of France’s business sentiment index improved to 92 in September from 89 in August.  Central bank officials reiterated their prior forecast that GDP likely rose 0.3% in the third quarter.  The French trade deficit jumped to EUR 3.4 billion in August from EUR 1.0 billion in July.

Dutch consumer prices rose 0.4% in the year to September but were unchanged on-year measured in a European hamonized way.  Greek consumer price inflation slowed a tenth to 0.7% in the year to September.  Irish consumer prices fell by a greater 6.5% in the year to September.

Thai consumer sentiment improved to 68.4 last month from 67.4 in August.  South Korean finance ministry officials called domestic demand weak despite signs of improvement.  State firms’ borrowing of dollars will be restricted to help curb the won’s rise.  New Zealand’s finance minister warned that kiwi appreciation will hurt the recovery. Malaysia’s central bank governor promised a supportive monetary policy amid low inflationary risks.

Industrial production in Slovakia fell less than expected in August.  Hungary’s trade deficit in August of EUR 229 million was less than forecast, as imports and exports dropped from a year earlier by 20% and 26%.  Lithuanian consumer prices rose 2.7% in the year to September, posting the first acceleration in 8 months.

Canada releases housing starts data.  The U.S. releases figures on weekly jobless claims and wholesale inventories. 

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


Comments are closed.