Dollar Stronger

July 12, 2010

The dollar has risen 0.7% against the Swiss franc, 0.6% against the euro, 0.5% against the Aussie dollar, 0.3% against sterling, and 0.2% versus the kiwi.  It is unchanged against the yen and 0.1% softer against the Canadian dollar.  The yuan firmed 0.1% after showing no change for several days.

The Japanese Nikkei fell 0.4% following news that the ruling Democratic Party government had lost control of the upper house in parliament.  Prime Minister Kan vowed not to stand down.  Stocks climbed 1.1% in China, 0.6% in India, Sri Lanka and South Korea, 0.5% in Indonesia, 0.4% in Hong Kong, and 0.3% in Australia.  In Europe, stock markets in Germany, France and Britain are only marginally changed.

The yield on 10-year JGBs slid 5 basis points to 1.12 in spite of the election result, which is likely to impede fiscal consolidation efforts.  Prime Minister Kan had favored a consumption tax increase.  The last time that was tried in 1997, Japan relapsed into recession.  The Democratic Party now controls just 106 of 242 upper house seats, but the prime minister is determined by the composition of the lower house, which the DPJ still controls.

Ten-year German bund and British gilt yields eased 4 and 1 basis points.

Oil and gold prices have dropped 0.4% and 0.6% to $75.61 per barrel and $1205.20 per ounce.

The trading room distraction of the World Cup games is over.  Spain won for the first time.  In the United States, the mid-summer baseball all-star game will be played tomorrow.

Japanese domestic corporate goods prices decreased 0.4% in June, keeping the 12-month rate of advance at 0.5%.  Export and import prices fell by 1.2% and 2.7%, respectively.

Reuters published its latest monthly estimates of Japan’s Tankan diffusion index.  The Bank of Japan Tankan gets released only quarterly, by the Reuters proxy index helps forecasters chart shifts in that index during the quarter.  Reuters showed the manufacturing Tankan component rising 3 points from 9 in June to 12 in July, a two and half year high, but the non-manufacturing index dropping four points to minus 12.

Britain’s final estimate of real GDP growth was unrevised, showing a 0.3% non-annualized increase from 4Q09 and a drop of 0.2% from the first quarter of 2009.  The strength of investment (up 4.5%) and government expenditures (+1.5%) was mitigated by a 0.1% dip in personal consumption and a drag from net foreign demand.  Exports fell 1.7%, while imports climbed 1.6% in the first quarter.

Britain’s current account swung to a deficit of Gbp 9.6 billion in the first quarter from a Gbp 0.5 billion surplus in 4Q09.  The shortfall was twice as large as forecast and equivalent to 2.7% of GDP. Net investment income dropped sharply in the latest quarter to Gbp 3.8 billion from Gbp 11.9 billion in 4Q09.

The U.K. services index in April was 1.0% greater than a year earlier.

On-year growth in India’s industrial production declined to 11.5% in May from 16.5% in April.

Czech consumer price inflation held steady at 1.2% in June.  Romanian CPI inflation accelerated to 4.4% from 4.2% between May and June.

Mortgage finance in Australia rebounded from April’s 1.8% decline with a 1.9% increase in May.  Little change had been anticipated.

Turkey’s current account deficit doubled to $3.0 billion in May from $1.6 billion in April.

No major U.S. or Canadian statistical releases are scheduled today.

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


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