Dollar Retreats a Bit Further as Investors Await Bernanke JEC Testimony

April 14, 2010

The dollar slid 0.5% against the Australian dollar, 0.3% versus the Canadian dollar and British pound, and 0.2% against the euro and kiwi.  The yen did even worse, dropping 0.3% against the greenback, and the Swissie is unchanged against the U.S. currency.

Stocks are up 1.5% in South Korea, 1.6% in Singapore, 0.9% in Australia, 0.8% in New Zealand and Taiwan, 0.5% in Sri Lanka, Britain and France, and 0.4% in Germany and Japan, and China.

While ten-year British gilt yields climbed 3 basis points, JGBs dipped a basis point, and German bunds are steady.

Oil and gold prices advanced 0.9% and 0.4% to $84.83 per barrel and $1159.40 per ounce.

Industrial production in the euro area increased by a bigger-than-forecast 0.9% in February even though none of the four largest economies in the bloc saw output rise that month.  On-year comparisons (+4.1% total) showed a huge disparity between Germany (+6.8%) and Greece (down 10.4%).  Production in January-February was 1.8% greater than the 4Q09 level.

Greek debt has been a fading market factor; however, financier George Soros for one thinks the aid package will not save the economy because the interest rate will still be too burdensome.

Moody’s upgraded South Korea’s debt rating to A1 from A2.  South Korea’s jobless rate slid to 3.8% in March from 4.4% in February.  Import prices dropped 4.3% in the year to March, partly reflecting the won’s significant appreciation.

There have been mixed signals on immediate prospects for the Chinese yuan.

  • A government economist in China mooted that slower money and credit growth should allow a rate hike to be delayed until after midyear.
  • Singapore’s Monetary Authority (MAS) effectively revalued the Singapore dollar, re-centering its nominal effective exchange rate band higher to prevailing rates and indicating a modest and gradual strengthening bias on that band rather than a neutral one as before.  The Singapore currency jumped 1% against the U.S. dollar, its biggest daily gain in 11 months.  Singapore GDP soared twice as much as expected last quarter, lifting the on-year growth rate to 13.1% from 4.0% in 4Q09.
  • Chinese foreign direct investment inflows were 7.7% greater last quarter than a year earlier.  The rise was three times more than assumed.  Analysts are bracing from Thursday’s Chinese GDP data, which are expected to show on-year growth of about 11.7%.
  • There’s been another severe earthquake in China in Qinghai with many deaths and even more injuries.
  • President Hu is said to have not accepted President Obama’s call for a stronger yuan now.

Bank of Japan Governor Shirakawa reiterated that monetary policy will stay very accommodative for the time being.

New Zealand reported an unexpected 0.6% drop in retail sales in February, with non-auto sales falling 0.9%.  Sales also fell in December but rose 0.7% in January.

Australian consumer confidence sank 1.0% in April.

Following yesterday’s decision to leave the Turkish central bank overnight rate at 6.5%, which was as expected, monetary authorities in that country announced that their benchmark interest rate will in the future be switched to the 1-week repo rate, which is at 7.0%, but no timing was given.  This modification is a passive way to underscore the cautious approach to an “exit strategy.”  Reserve requirements will also be lifted in the early stage of the strategy to help mop up liquidity.

South African retail sales posted on-year negative growth of 1.5% for a second straight month in February, sustaining the 13-month long streak of negative results.  Analysts had anticipated sales rising 0.6%.

Finnish consumer prices increased 0.5% in March and 0.6% from a year earlier.

Besides the Bernanke testimony which may clarify the timing of a rate increase, investors await the release of U.S. consumer prices, retail sales, and business inventories.  The Fed’s Beige Book, which documents regional economic conditions, also gets published today.

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

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