Significant Currency Movements Overnight

March 24, 2010

Currencies reflect active risk plays.  The yen gained 0.9% against the dollar, which otherwise advanced by 1.1% against the euro and Swissy, 0.9% relative to the kiwi, 0.7% against the Australian dollar, 0.6% against sterling and 0.5% versus the Canadian dollar.

The euro got as low as $1.3341, weakest since $1.3212 during the first week of May 2009, despite strong flash PMI readings in Euroland.  These were trumped by adverse news related to budget crises in the region.  The Swissy rose to a record high of 1.4227 per euro.

  • German and French leaders agreed upon an IMF role in aiding Greece, a development that ECB officials have implied could hurt the euro.
  • Fitch downgraded Portugal’s rating to AA minus from AA and retained a negative outlook.

Stocks rose 2.0% in Indonesia and 1.8% in Pakistan but otherwise show modest moves of +0.5% in Thailand, +0.4% in Malaysia, +0.3% in Australia, +0.1% in Taiwan, Hong Kong, and New Zealand, 0.0% in China, and dips of 0.1% in South Korea and 0.7% in Singapore.  In Europe, the Paris Cac, British Ftse, and German Dax have traded down 0.3%, 0.2%, and 0.1%.

Commodity prices dropped.  Oil softened 1.7% to $80.48 per barrel.  Gold lost 0.9% to $1094.10 per ounce.

Ten-year gilt and bund yields firmed two basis points each, while their JGB counterpart slid by two basis points.

Euroland recorded a 31-month high composite PMI flash reading of 55.3, up from 53.7 in February and January.  Such suggests GDP growth in 1Q10 will run about 0.5%.  The manufacturing component improved 2.1 points to 56.3 versus an expected 54 score, helped by a more competitive euro.  Services, which have lagged because of weak consumer spending, managed a 1.9-point advance to a 28-month high of 53.7.

The German manufacturing PMI gained 2.4 points to a 119-month peak of 59.6, while the German services PMI climbed 2.8 points to a sold score of 54.7.  Germany’s composite PMI was 58.5, a 31-month high, after 55.7 in February and 54.6 in January.

The German IFO business climate index reinforced the PMI readings, printing 2.9 points higher in March at 98.1.  Such had been 82.1 a year earlier.  Most of the improvement in March was in current conditions of 94.4 after 89.8 in February.  The expectations component gained one point to 101.9.  All of the four broad industry types in the index went up in March.  The IFO services index also improved, climbing to 9.8 in March from 6.8 in February and 4.9 in January.

Real construction orders in Germany fell 8.7% in January and by 5.2% from a year earlier.

The French PMI composite index slid 0.4 points to 55.2 because of a 1.6-point drop in services to a 7-month low of 53.0, which outweighed a 1.4-point rise in manufacturing to a 40-month high of 56.3.

Italian consumer confidence unexpectedly fell 1.4 points to 106.3 in March, a 9-month low and the third deterioration in a row.

Swedish consumer confidence rose to 15.5 in March from 13.0 in February, while business sentiment in manufacturing remained steady at +3.

Czech business and consumer confidence each slid in March. 

Japan reported terrific trade numbers for February.  The customs trade surplus was Y 651 billion versus Y 71 billion a year earlier.  Export growth of 45.3% was the best on-year gain since 1980.  Exports to the United States and China respectively soared by 50.4% and 47.7%.  Total export volumes were 46.0% greater than a year earlier, beating import volume growth of 22.9%.  The total seasonally adjusted trade surplus narrowed 27.7%, however, from January’s level.

Sakakibara, a former Ministry of Finance official known as Mr. Yen, called Japan’s currency undervalued and predicted it would advance toward 85/$.  The accuracy of his previous forecasting was not very good.

New Zealand’s seasonally adjusted current account swung to a NZ$ 3.11 billion deficit last quarter from a NZ$ 0.040 billion surplus in 3Q09.  The deficit of NZ$ 5.47 billion in 2009 was 65.7% smaller than that in 2008 reflecting a deep recession.  As a share of GDP, the deficit equaled 2.9% after 8.7% in 2008 but is expected to reach 5% or higher this year.

South African consumer price inflation slowed to a 12-month in-target rate of 5.7% in February from 6.2% in January.  Such is at a 3-year low as the South African Reserve Bank prepares for an interest rate policy meeting tomorrow.  The key 7.0% rate is likely to be retained.

Norway’s central bank meets today, and the British budget will be presented, starting at 12:30 GMT (see preview).  Bank of Canada Governor Carney gives an important speech at 16:50 GMT in which he may hint at a coming interest rate increase.  The head of China’s central bank cautioned against tightening policy before being sure the recovery is well-entrenched.  U.S. durable goods orders and new home sales data arrive today.

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

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