Stronger Yen and Weaker Pound

March 9, 2010

The dollar fell 0.6% against the yen and below the 90/$ level.  Otherwise, the dollar advanced 0.8% against sterling, 0.5% relative to the euro and kiwi, 0.4% against the Swiss franc, and 0.3% versus the Canadian and Australian currencies.

Stocks were mixed in Asia but have retreated more uniformly in Europe.  Equities gained 1.2% in Indonesia, 0.6% in China and 0.3% in Australia but lost 0.7% in Sri Lanka, 0.5% in Malaysia, and 0.3% in New Zealand and India.  The British Ftse, Paris Cac and German Dax are down by 0.7%, 0.6% and 0.5%.

Oil and gold fell by 1.3% to $80.77 per barrel and by 0.6% to $1117.20 per ounce.

Ten-year sovereign bond yields fell by 4 basis points in Britain and by a single basis point in Germany and Japan.

British January trade data were far worse than forecast, as merchandise exports sank 6.9% below the level in December.  The total goods and services deficit widened to Gbp 3.768 billion from Gbp 2.55 billion, while the goods deficit jumped 14% to Gbp 7.987 billion from Gbp 7.01 billion in December and Gbp 6.84 billion in November.  Both January deficits were the largest red-ink results since August 2008.

The British house price balance index reported by the Royal Institute of Chartered Surveyors (RICs) slumped unexpectedly to +17 in February from +31 in January.  The British Retail Consortium reported on-year increases in February of 2.2% in same-store sales and 4.5% in total retail sales.  February 2009 had been an extremely weak month, so take these comparative advances with a grain of salt.

A top Chinese FX policy chief, Yi Gang, acknowledged rising upward pressure on the yuan lately and said that Chinese reserves are appropriately diversified.

U.S. President Obama holds talks later today with Greek Prime Minister Papandreou, who was educated at Amherst College in the United States.  Previews of that meeting have downplayed the role of the United States to finding a solution to the European debt problems that have weighed on the euro but note that a weaker euro would create problems for the United States via softer U.S. export competitiveness.

The Fitch credit rating agency warned that Portugal’s rating might get downgraded, expressed uncertainty over the adequacy of the latest Greek austerity measures, noted big risks in Spain’s fiscal prognosis, and urged British officials to tackle their deficit more forcefully.

Australia reported some strong data that have investors wondering if there will be a fifth rate hike in April.  Job ads soared 19.1% last month, roaring back from an 8.1% drop in January.  It was the largest increase in 11 years.  Australian business conditions improved to +19 in February from 15 in January and 8 in December, while business confidence rose five points to +8.

Japan’s index of leading economic indicators printed at 97.1 in January on a preliminary reading, best since July 2007 after 94.7 in December.  The coincident index firmed to 99.9 from 97.4.  The diffusion measure of the index of lagging economic indicators scored 100, its maximum possible value for the first time since September 2004.  Japanese machine tool orders were 217.3% greater than a year earlier in February, an accelerated advance from 189.4% in the year to January.

South Korean producer prices increased 0.3% last month but posted a smaller on-year advance of 2.4% after 2.8% in the year to January.

Swiss consumer price inflation remains very subdued, firming 0.1% in February and easing to a 12-month pace of 0.9% from 1.0% in the year to January.  The Swiss National Bank will be releasing its latest quarterly interest rate decision and policy statement on Thursday.  No change is foreseen in the 0.25% target rate.

The French trade deficit of EUR 3.7 billion in January was smaller than December’s EUR 4.2 billion gap and less than forecast.  German Bundesbank President Weber, the front-running candidate to follow Trichet in the top ECB job, said Germany’s recovery remains essentially intact.

Norwegian consumer confidence this quarter printed at 18.5, better than expectations.

Greek consumer price inflation of 2.8% in February (and 2.9% on a harmonized basis) was above expectations of 2.5%.

Industrial production in Hungary rebounded 8.5% in January from December’s drop of 5.8%.  Czech industrial output in January was 5.3% greater than a year before.  Czech consumer prices were unchanged on month and up 0.6% on year in January. 

South African business sentiment of +43 in the first quarter of 2010 was much better than assumed.  South African house prices were 2.2% greater in February than a year before.

The U.S. NIFB and IBD/TIPP survey results will be reported today.  So will the JOLTS index.

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


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