Stronger Dollar Against Euro, Yen and Swiss Franc

July 9, 2010

The dollar has risen 0.5% against the Swissy, 0.3% versus the yen, euro, and Aussie dollar, and 0.1% relative to the Canadian and New Zealand dollars.  The dollar is stable against sterling and the yuan.  The U.S. Treasury Department’s 3-month delayed semi-annual foreign exchange report was released yesterday and did not declare China a “currency manipulator.”  While calling the unpegging of the CNY “significant,” Treasury officials promised to “closely monitor the appreciation of the renminbi” over the coming three months.  It’s a strategy of trust but verify.

Stocks performed better in the Pacific Rim than Europe.  Equities gained 2.8% in China, 1.1% in India, 1.6% in Hong Kong, 1.0% in Indonesia, 0.7% in Singapore and New Zealand, 0.9% in Australia and 0.5% in Japan.  In Europe, the British Ftse is flat, and stocks are only 0.5% and 0.4% higher in France and Germany.

Ten-year yields on German bunds, Japanese JGBs, and British gilts show gains of 3, 3, and 2 basis points.

Oil prices advanced 0.4% to $75.76 per barrel, while gold prices are unchanged and marginally under the $1200 threshold.

The Bank of Korea finally implemented a rate hike, raising its seven-day repo rate by 25 basis points to 2.25%.  Only a few analysts thought a tightening would happen at this month’s meeting.

Britain’s trade deficit widened in May.  The goods and services deficit was Gbp 8.062 billion after Gbp 7.411 billion in April.  The merchandise trade gap reached Gbp 3.817 billion compared to Gbp 3.502 billion in April.  Import volumes jumped 4.2%.  British producer output prices posted their first monthly drop in 19 months, a dip of 0.3% that trimmed the 12-month advance to 5.1% from 5.5%.  Core PPI-O slowed to 4.8% from 4.4%.  Producer input prices fell too, dropping 0.2% on month and reducing the on-year increase to 10.7% from 11.3%.

French and Italian industrial production gains in May beat street forecasts.   Italian output increased 1.0% after rising 0.9% in April and was 7.3% greater than in May 2009.  French production jumped 1.7%, more than reversing April’s 0.5% drop and raising the on-year increase to 8.0%.

Final German consumer price data for June confirmed the preliminary indications of a 0.1% monthly uptick and a smaller 0.9% rise from mid-2009.  Consumer prices climbed 0.9% at a seasonally adjusted annualized pace in the first half of 2010 compared to a pace of 0.7% in 2H09 and 0.9% in 1H09.  Non-energy consumer prices in Germany rose 0.6% annualized in 1H10, even less than the rates of 0.8% annualized in the second half of 2009 or 1.1% in 1H09.

Swedish industrial production shot up 2.3% in May and by 12.4% from a year earlier.  Led by foreign demand, industrial orders went up 2.1% on month and by 20.4% on year.

Norwegian consumer prices dipped 0.1% in June, cutting their 12-month advance to 1.9% from 2.5% in the year to May.  Producer prices in Norway rose 2.3%.

Czech industrial output grew 16.9% between May 2009 and May 2010, their greatest yearly advance since January 2001.

New Zealand credit card spending rose 0.4% in June, same as in May.

Canada just reported spectacular June labor market statistics.  Along with several European releases of industrial activity, the week is ending with a bunch of better-than-anticipated data.  Canada created 93.2K new jobs last month, split evenly between full-time and part-time positions.  The jobless rate fell from 8.1% in May to 7.9%, the first sub-8.0% result since the first month of last year.  And wages increased by a smaller 1.7% in the last 12 months, down from 2.4% in the year to May.

Canada will be reporting housing starts later this morning, while the U.S. releases figures on wholesale inventories.

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

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