New Overnight Developments Abroad: Dollar Recovers Some Ground

November 17, 2009

The dollar has risen 1.0% against the Australian and Canadian dollars, 0.7% versus the Swiss franc, 0.6% against the kiwi and 0.5% relative to the euro.  It rose just 0.2% against sterling and is unchanged against the yen amid a flurry of risk aversion.

Stocks are lower, with declines of 0.6% in Japan, 0.4% in France, South Korea and Britain, 0.3% in Germany, 1.3% in New Zealand and 0.5% in Australia.

Ten-year gilt and JGB yields softened two and three basis points to 3.73% and 1.31%.  Bund yields are one basis points firmer.

Gold and oil prices each slid 0.6% to $1131.90 per troy ounce and $78.44 per barrel.

Minutes from the November 3rd Australian central bank policy meeting gave pause to the timing of future rate increases following hikes of 25 basis points in October and November.  Officials called the pace of additional restraint “an open question” and expressed some concern about the drag on growth and price pressures of the appreciating Aussie dollar.

Japan’s September tertiary index, a gauge of service-sector activity, fell 0.5% instead of rising 0.3% as projected.  This was the first monthly drop since May and left September’s level 0.2% below the 3Q mean.  The index was 5.0% lower than in September 2008.  Concern exists that the economy may slump anew when stimulus is removed.  Housing loans grew twice as rapidly in the year to 3Q09, 0.8%, as in the year to 2Q.

Obama in China tried again to cajole Beijing officials to let the yuan rise.  The pleas are unlikely to work.

Britain had more consumer price inflation last month than assumed.  The CPI firmed 0.2%, lifting the 12-month pace to 1.5% from 1.1% in September.  That was the first acceleration in eight months.  Core CPI ticked back to 1.8%, the pace in July and August, from 1.7% in September.  Retail price inflation picked up to minus 0.8% from minus 1.4%.  Both the RPIX and RPIY indices accelerated too, reaching 1.9% and 2.8% from respective 12-month rises in September of 1.3% and 2.0%.

Euroland’s seasonally adjusted third-quarter trade surplus of EUR 14.6 billion was 4.7 times wider than the EUR 3.1 billion surplus in 2Q.  The surplus widened to EUR 6.8 billion in September from 2.2 billion euros in August and also surpassed July’s EUR 5.6 billion.  Exports posted a monthly increase of 5.5%, while imports went up 1.1%.  The unadjusted trade surplus in January-September was EUR 10.7 billion, a EUR 55.7 billion favorable swing from a EUR 45.0 billion in January-September of 2008.  September exports and imports were 18.5% and 24.5% lower than a year earlier.

Swiss retail sales fell 1.6% in the year to September, worse than assumed.

Portugal’s jobless rate climbed to 9.8% in 3Q09 from 9.1% in 2Q and 7.7% a year earlier.

Producer prices in Finland firmed 0.1% in October, narrowing their 12-month drop to 8.4% from a decline of 9.4% in the year to September.

Russian industrial production sank 11.2% in the year to October, which was considerably weaker than analysts had assumed.

Opinions differ over whether the South African Reserve Bank will reduce its 7.0% benchmark interest rate after today’s meeting.

Several U.S. indicators get released today: industrial production, capacity usage, producer prices, the National Home Builders Index, and the monthly Treasury report on capital flows with foreigners.  Lacker and Yellen of the Fed and Stark of the ECB will be speaking.

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


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