Dollar Extends Recovery from Monday Lows

February 18, 2010

The dollar is 0.6% higher against sterling and shows gains of 0.4% against the kiwi, 0.3% versus the euro, Swiss franc and Aussie dollar and 0.1% relative to the Canadian dollar.  The dollar has lost 0.4% versus the yen, which like the dollar benefits from worries about Europe’s debt and growth prospects.

China and Taiwan remain closed for the Lunar New Year holiday. Stocks rose 0.3% in Japan, Pakistan, and Sri Lanka but fell 0.8% in Indonesia, 0.6% in India, 0.9% in Singapore, and 0.3% in Australia.  European stocks show modest gains of 0.5% in Britain and 0.3% each in France and Germany.

Ten-year bund and gilt yields rose three basis points apiece, while the 10-year JGB eased a basis point to a low 1.32%.

Gold and oil slumped 1.3% and 0.8% to $1105.90 per ounce and $76.68 per barrel.

After a 2-day, five hour 7 minute Board meeting, the Bank of Japan by a unanimous 7-0 vote snubbed government pressure to do more to combat deflation,

  • leaving its 0.1% key interest rate, the amount of monthly JGB purchases, and lending to banks unchanged,
  • telling the government to devise plans to reduce its massive debt,
  • identifying better productivity growth as the key to ending deflation,
  • rejecting calls to set an inflation target,
  • and retaining a baseline forecast that growth will accelerate after 3Q10 and that core CPI inflation will become less negative on its own.

Japan’s index of leading economic indicators was revised up to 94.3 in December from 94.0 reported initially.  The revised coincident and lagging indices printed at 97.4 and 83.7.

Investor reaction to the FOMC minutes has been generally positive.  The standoff between Greece and the rest of the EU seems to be deepening over calls on Athens to adopt more credible deficit-cutting measures as a condition of any future outside aid.

Britain posted its first January deficit on the public sector net borrowing, a shortfall of Gbp 4.339 billion versus a surplus of Gbp 5.272 billion in January 2009.  The current budget surplus was $1.174 billion, 88.5% smaller than a year earlier, and the public sector net cash requirement resulted in a repayment of Gbp 11.77 billion compared to one of Gbp 24.853 billion in January 2009.  Debt now totals 59.9% of GDP, up from 50.0% in January 2009 and a fiscal year low of 29.7% in 2001/02.

The CBI February survey of U.K. businesses resulted in an industrial trends reading of minus 36 after minus 39 in January, minus 42 in December and a low of minus 59 last July.  Progress continues but the levels remain very weak.

Bank of England lending data for January were disappointing.  Mortgage approvals of 49K were the least since July, and gross lending of Gbp 8.6 billion was less than December’s Gbp 11.5 billion and January 2009’s Gbp 10.3 billion.  M4 growth slowed to 5.1% in the year to January from 6.4% in December.  There’s little evidence that quantitative easing affected money and credit growth.

The Swiss trade surplus nearly doubled to Chf 2.42 billion in January from Chf 1.36 billion in December, as exports increased 3.2%.  The Swiss ZEW index of investor sentiment settled back to 52.5 in February from 56.2 in January.

Greek harmonized consumer price inflation of 2.3% in the year to January was less than forecast. Dutch unemployment of 5.6% last month met expectations.  Swedish unemployment of 9.4% last month exceeded expectations slightly.  Swedish on-year CPI inflation eased to 0.6% in January from 0.9% in December.  Danish consumer sentiment of 1.8 in February was a bit better than anticipated. Russia’s 9.2% jobless rate last month surpassed forecasts.  Russian retail sales were only 0.3% higher in January than a year earlier.  Portuguese producer prices climbed 1.5% in the year to January.

Italy’s statistical agency projects debt of 117.2% of GDP this year and 118.2% in 2011 versus 114.8% in 2009.  The 2010 deficit is penciled in at 5.1% of GDP.

Norwegian GDP edged up by a less-than-anticipated 0.1% last quarter after climbing 0.5% in 3Q.  GDP fell 1.5% in 2009 after rise 1.8% in 2008.

Unemployment remained at 4.9% in Hong Kong in November-January.  A slight dip had been anticipated.

Australian business sentiment improved to +18 last quarter from +16 in 3Q09.  New Zealand consumer confidence fell back 5.9% in February after a 10.8% advance in January.

Base effects lifted Canadian CPI inflation to 1.9% from 1.3% on year in January for all items and to 2.0% from 1.5% on core.  Those measures posted monthly rises of 0.4% and 0.2% in seasonally adjusted terms.  Canadian international securities flows will be reported later today.

Scheduled U.S. data include producer prices, the Philly Fed index, and weekly jobless claims.

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



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