Weaker Aussie and New Zealand Dollars

July 28, 2010

The U.S. dollar advanced 1.0% and 0.7% against its Australian and New Zealand counterparts but was pretty steady otherwise.  The Greenback dipped 0.3% against the loonie, 0.2% relative to the Swissy and yen, and 0.1% against the euro.  The dollar rose 0.1% against sterling and is again unchanged versus the yuan.

Stocks rose sharply overnight in Japan (2.7%), China (2.4%) and Sri Lanka (2.9%).  Equities climbed 0.7% in Australia, 0.6% in Hong Kong, 0.5% in the Philippines, Taiwan and New Zealand and 0.3% in South Korea. In Europe, the Paris Cac and German Dax have traded up 0.6% and 0.1%, while the British Ftse is unchanged.

The yield on 10-year JGBs rose four basis points to 1.10%, while those on British gilts and German bunds slid by two bps and one bp.

On this sleepy summer day, gold and oil recovered just 0.3% and 0.1% to $1165.40 per ounce and $77.56 per barrel after sharp declines on Tuesday.

Australian consumer prices rose only 0.6% in the second quarter, two-thirds as much as forecast, and the 3.1% on-year pace was three-tenths less than assumed.  Core inflation slowed to 2.7% from 3.0-3.1% in the first quarter and 3.9% in 2Q09.  The data suggest a continuing pause in Reserve Bank of Australia tightening and caused to Aussie dollar to drop overnight.

Business sentiment in New Zealand fell to a one-year low of 27.9% in July from 40.9% in June.  Most analysts still expect the Reserve Bank of New Zealand to announce a rate increase of 25 basis points on Thursday (21:00 GMT today).

All six German states upon which that country’s preliminary CPI report is based released July data today.  Half showed a monthly gain of 0.2%, and the rest showed a 0.3% increase.  On-year inflation ranged from 0.9% to 1.2%, slightly higher than in June but similar to the results in May.  Package holidays lent seasonal strength to the numbers.  The trend remains very subdued.

A Bank of Japan official commented that economic recovery is not very strong. 

South Korean authorities sold won to temper its pace of appreciation.  The country’s current account surplus in June was 25% wider than in May and at an 11-month high.

South African consumer price inflation slowed further to 4.2% on year in June from 4.6% in May.  The central bank’s target range is 3-6%.

Bank of England Governor King downplayed the better-than-expected British 2Q GDP growth rate, indicated two-sided risk on the next change in monetary policy, and said a “considerable period” would pass before normal interest rate levels are restored.

Spanish and Finnish real retail sales were 0.9% and 3.0% greater than a year earlier in June.

Icelandic CPI inflation slowed to a 12-month pace of 4.8% in July from 5.7% in June.

The IMF’s annual examination of the Chinese economy did not, unlike before, call the yuan substantially undervalued but recommended an appreciating trend and higher central bank interest rates in that country.

Scheduled U.S. releases today included the Fed’s Beige Book, durable goods orders, and oil inventories.

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

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