Dollar Marginally Softer Despite Further Drop in Stocks

January 22, 2010

The dollar has lost 0.5% against the Australian dollar, 0.4% relative to the kiwi, 0.2% against the euro, yen and Canadian dollar and 0.1% against the Swiss franc.  The greenback is unchanged against sterling.

Stocks fell 2.6% in Japan, 2.5% in Taiwan, 2.2% in South Korea, 1.6% in Australia, 1.2% in China, 1.1% in Indonesia, New Zealand, India, and Singapore, and 0.7% in Hong Kong.  In Europe, the German Dax, Paris Cac and British Ftse are trading 0.6%, 0.5% and 0.4% lower.  Investors are uneasy about constraints Obama will be placing on banks and fear such could impede economic recovery.

Ten-year sovereign bond yields are down by 4, 2, and 1 basis points in Britain, Japan, and Germany.

Gold is 0.7% weaker and below the $1100 level. Oil recovered 0.2% to $76.20 per barrel.

Investors continue to speculate about Chinese policies and Greek debt.

  • After a report from China yesterday that omitted references to “a moderately loose monetary policy” and a “proactive fiscal policy” in the period ahead, the central bank governor today reiterated that policy would be flexible and both support growth and control inflation.  Mr. Zhou’s reassuring remarks helped lift the Australian and New Zealand dollars.
  • Greek officials continue to deny that abandoning the euro is an option.  What else can they say?  The Greek current account deficit widened 12% on month to EUR 2.8 billion in November.

Japan’s all-industry index firmed only 0.1% in November, half the expected 0.2%, as a dip of 0.2% in services countered gains of 1.8% in construction and 2.2% in industrial production.  The all-industry index, a proxy for GDP, was 0.9% greater in October-November than its 3Q level.  The index was 3.5% lower than in November 2008.  Japanese chain store sales were 5.0% lower in December than a year earlier.

Euroland industrial orders jumped 1.6% in November, three times greater than forecast.  The twelve-month rate of decline narrowed to 1.5% from 14.4% in the year to October.  Orders in October-November were 0.1% greater than their 3Q level, which is still a much slower pace than seen in the third quarter.

Euroland’s current account deficit narrowed sharply to EUR 2.7 billion in 3Q09 (0.1% of GDP) from EUR 21.7 billion in 2Q (1.0% of GDP) and EUR 38.0 billion in 1Q (1.7% of GDP).

German industrial orders growth in November was revised sharply higher to 2.8% from 0.2% reported initially.  Revisions are not ordinarily reported but rather indicated when the next month’s data get released.  Foreign orders for capital goods were revised to a jump of 5.9% from a drop of 2.2%.

British retail sales volume only climbed 0.3% in December, a fourth of what analysts were predicting.  It was the weakest December on-year gain, 2.1%, since 1998.

Tucker of the Bank of England and Gonzalez-Paramo of the ECB urged better banking regulation legislation.  Bank of Japan Governor Shirakawa promised to maintain an accommodative policy to help wipe out deflation.  Former Japanese Finance Minister Yosano warned that runaway government debt could lift long-term interest rates.

Taiwanese unemployment slid to 5.74% in December from 5.86% in November but averaged 5.85% last year after 4.14% in 2008.

South African retail sales grew at an on-year pace of 4.0% in December after 3.9% in November.

Australian import prices sank 4.3% last quarter and by 15.5% from the final quarter of 2008.  Export prices fell 1.7% versus 3Q and 32.7% from 4Q08, the biggest on-year drop ever.

French business sentiment rose four points to 92 in January.  A score of 90 after 88 had been predicted.

On-year wage growth in Iceland eased to 3.6% in December from 4.0% in November.  Austrian industrial output fell 4.7% from a year earlier in November after recording an 8.0% drop in October.

Canadian retail sales will be reported at 13:30 GMT.  No meaningful data releases are scheduled in the United States.  Attention in the U.S. has turned to next week’s State of the Union address followed by President Obama’s budget speech a few days later.  The FOMC meets next week as well, and the first estimate of fourth-quarter GDP will be reported.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.



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