Dollar Weaker on Lessening Investor Fear

February 11, 2010

The U.S. dollar slumped 1.5% against the Australian dollar, 0.8% versus the kiwi, 0.4% against the yen and Canadian dollar, and 0.1% against the euro and pound.  The Swiss franc is unchanged against the dollar.

EU leaders are meeting today.  Markets assume that aid to avert a Greek default and to lay a framework for handling any further national fiscal problems among Euroland members is on the way.  The Aussie dollar was buoyed strongly by the latest labor market report from that country.  Solid Chinese data is also promoting less risk aversion.

Japan is closed for National Foundation Day.  Elsewhere in the Pacific Rim, equities advanced 1.8% in South Korea, 1.5% in India, 1.0% in Indonesia, 1.9% in Hong Kong, 0.9% in Australia, and 0.7% in Pakistan and Singapore.  In Europe, the Ftse, Cac40, and Dax show gains to 1.0%, 0.7% and 0.3%.

Ten-year bund and gilt yields are three and four basis points higher.

Oil prices rose 0.7% to $75.06/barrel.  Gold firmed 0.3% to $1079.40 per troy ounce.

Australia reported a lower January jobless rate of 5.3% after 5.5% in December and 5.6% in November.  Employment grew another 52.7K on top of an upwardly revised 37.5K in December and has increased at a sizzling 4.6% annualized pace over the last three reported months.  Expected Australian inflation eased to 3.2% in February from 3.5% in January.

Chinese M1 in January was a record 39% greater than a year earlier.  M2 growth accelerated to 26.0% from 22.7% in the year to December.  1.39 trillion yuan loans were made, 18.5% of the central bank’s full-2010 target but 14% less than in January 2009.  A report from the Peoples Bank of China pledged to retain a moderately loose policy stance and an essentially stable yuan.  U.S. President Obama wants to see the currency appreciating within a year.

Chinese consumer prices rose 1.5% in the year to January, down from an on-year pace of 1.9% in December and below expectations of a slight acceleration.  The PPI was 4.4% greater than a year earlier, up from 1.7% in the year to December.  Property price inflation of 9.5% in January constituted a 21-month high.

The Bank of Korea left its key interest rate steady at 2.0% as had been anticipated.  That level has prevailed since February 2009.

Consumer confidence in Thailand improved to 71.9 in January from 70.4 in December.

New Zealand’s purchasing managers index settled back to 52 in January from 53 in December.

The Swedish Riksbank kept a 0.25% repo rate as expected.  However, bank officials indicated a likely somewhat earlier onset of rate hikes in “summer or early autumn,” citing a better foundation for growth and an upwardly revised inflation forecast of 1.6% this year and 2.9% in 2011.

Britain’s National Institute of Economic and Social Research estimates GDP growth in November-January of 0.4%, up from 0.1% in 4Q09.  The improvement reflects the weakness of October, not improvement in January.

The ECB published its February Bulletin, which as usual stuck to the points made by Trichet at this month’s press conference.  More details of the bank’s exit strategy will be unveiled next month.

German wholesale prices jumped 1.3% in January and accelerated to a 12-month pace of 1.9% from 0.2% in December, minus 3.2% in November, minus 7.0% in October and a low point of minus 10.6% last July.

Swiss consumer prices edged down 0.1% last month, but their on-year change rose to 1.0% from 0.3% in the year to December.

Spanish GDP edged down 0.1% in the fourth quarter and fell 3.1% compared to the fourth quarter of 2008.

Estonian GDP was 9.4% lower than a year before in the fourth quarter despite a positive advance of 2.6% from 3Q. Czech industrial production in December was 1.8% greater than a year earlier.  Turkey’s current account was 3.2 billion lira in the red in December. South African manufacturing production rose 3.0% in December (3.2% from a year earlier), much better than forecast.

Dutch consumer prices were steady on month in January and up 0.8% from a year earlier.  Ireland’s CPI fell 0.7% last month and by 3.9% from January 2009.

The U.S. releases retail sales, business inventories, and weekly jobless claims today.  Canada reports house prices.  Federal offices in D.C. remain closed in the wake a a second monster snowstorm this week.

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



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