Weaker Yen and Dollar

April 20, 2010

The dollar gained 0.8% against the yen overnight but otherwise has fallen 1.2% against the Australian dollar, 0.8% versus sterling, 0.7% against the Canadian dollar, 0.5% relative to the kiwi, and by 0.3% against the Swissie and euro.  Investors have been reassured by good earnings reports.

Chinese stocks buckled another 3.1% in the face of a clampdown on property loans.  Equities elsewhere rose 5.4% in Thailand, 1.8% in Indonesia, 1.0% in Hong Kong, 0.8% in South Korea, 0.7% in Malaysia and Singapore, and 0.6% in Taiwan.  In Europe, the German Dax, Paris Cac and British Ftse are up 1.2%, 1.0%, and 0.8%.

Ten-year sovereign debt yields firmed five basis points in Britain, two bps in Germany and one bp in Japan.

Oil climbed 1.4% to $82.58 per barrel.  Gold recovered 0.6% to $1142.80 per troy ounce.

The German ZEW expectations index of investor sentiment increased sharply from 44.5 in March to a six-month high of 53.0 in April and is well above its long-term average score of 27.3.  Current conditions posted a minus 39.2 reading after minus 51.9 in March.  The ZEW expectations index for Euroland was 46.0 versus 37.9 in March, and the current situation gauge went up to minus 52.4 from minus 61.3 in March.

Euroland’s seasonally adjusted current account was in deficit for a seventh consecutive time in February to the tune of EUR 3.9 billion after EUR 1.7 billion in January and EUR 0.1 billion in December, even though the merchandise trade surplus more than doubled to EUR 5.5 billion from EUR 2.4 billion in January.  The unadjusted current account posted a EUR 46.4 billion deficit in the twelve months to February, 71% smaller than in the previous twelve months.

German producer prices rose 0.7% in March, almost twice expectations, and this surprise cut the on-year PPI drop to 1.5% from 2.9% in February and 7.8% in July.  The PPI had dropped 4.2% on average in 2009 after climbing 4.1% per annum on average during the four previous years.

British consumer prices advanced 0.6% in March, twice as much as forecast, lifting the 12-month rate of increase to 3.4% from 3.0% in February and 2.9% at end-2009.  Core inflation only edged up a tenth to 3.0%.  The 12-month comparisons accelerated to 4.4% from 3.7% on the retail price index, 4.8% from 4.2% on the RPIX and RPIY from 2.9% on the RPIY index.  These indices also showed more inflation than assumed.

Greek unemployment jumped in January to 11.3% from 10.2% in yet another sign of the strongly recessionary impact of the country’s debt crisis.  An aid package is taking an excruciatingly long time to get done, and many analysts are concluding that all it will do is allow an eventual default in that country to be managed in a more orderly fashion.

Italian industrial orders slid 0.4% in February.  Industrial sales dropped 2.6% on the month.

Dutch consumer spending was 1.1% less in February than a year before compared to a 2.3% drop in the year to February 2009.

The Swedish Riksbank as expected left its key interest rate unchanged at 0.25%.

The Reserve Bank of India hiked its key lending and borrowing rates by 25 bps to 5.25% and 3.75%.  Many analysts had predicted an increase of 50 bps.  These moves constitute the second round of tightening for India.  Reserve requirements also got nudged upward.

Japan reported several economic indicators:

  • The tertiary index, a monthly gauge of service sector activity, dipped 0.2% in February after jumping 2.5% in January.  Although that was the third drop in four months, the trend is an improving one, and the change from a year earlier, a rise of 0.4%, was the first increase since at least 2008.  The tertiary index in January-February exceeded the 4Q level by 5.1%.
  • Machine tool orders in March were 262.1% higher than in March 2009, matching the on-year increase in February.
  • Convenience store sales in March were 4.9% less than a year earlier.  Department store sales had posted a 3.5% on-year drop.  These two items had fallen by 4.7% and 5.4% in the year to February.

Minutes from the Reserve Bank of Australia’s April policy meeting, which lifted the cash rate for a fifth time, observed very lively mining activity and indicated that more rate tightening lies ahead.

New Zealand consumer prices rose less than expected last quarter, gaining 0.4% after a 0.2% dip in 4Q09.  As a result, on-year CPI inflation failed to accelerate as assumed but instead held at a subdued 2.0%.  Non-fuel consumer prices were unchanged in the quarter.  Following the data, analysts said the first New Zealand rate hike is more likely to occur next quarter than in the present one.

Export orders in Taiwan rose 43.7% between March 2009 and March 2010, up from a 12-month rise of 36.3% in February.

Unemployment in Hong Kong decreased to a 15-month low of 4.4% in 1Q10 from 4.6% in the three months to February.

The Bank of Canada is not expected to raise rates at today’s policy announcement due at 09:00 EDT but will probably leave clues pointing to a move on June 1.

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

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