Dollar Depreciates Further

August 3, 2010

Dollar/yen broke below last week’s low to reach 85.775, which is less than a single yen away from the 14-year low touched in November 2009.  The dollar also reached a three-month low against the euro of $1.3263.  Net overnight declines in the dollar amount to 0.6% against the yen, 0.5% versus the euro, 0.4% relative to sterling, 0.3% against the Swiss franc, and 0.1% versus the kiwi.  The dollar is unchanged against the yuan and Canadian dollar and rose 0.2% against the Aussie dollar after the Reserve Bank of Australia left policy settings unchanged.

Equities in the Pacific Rim slumped 2.8% in Indonesia and 1.8% in China but advanced 1.3% in Japan, 0.7% in Australia and Sri Lanka, 0.6% in Taiwan and 0.2% in Thailand, New Zealand, Pakistan, Hong Kong and India.  Stocks in Europe firmed 0.3% in Germany but dipped 0.1% in Great Britain and France.

Ten-year German bund and Japanese JGB yields slid by three and two basis points.  The 2-year Treasury yield plumbed to a new record low of 0.53%, weighing on the dollar.

Oil and gold prices firmed by 0.6% and 0.3% to $81.85 per barrel and $1189.10 per troy ounce.

After leaving Australia’s Official Cash Rate unchanged at 4.5%, monetary officials released a statement that called present interest rate settings appropriate and global economic prospects uncertain.  There was no hint about the timing or direction of the next monetary policy change.  Australian growth is projected to hover close to trend, while CPI inflation is near its target.  The central bank engineered six rate hikes of 25 basis points each from October 2009 to May 2010.

Australian retail sales firmed 0.2% in June and were 3.2% higher than a year earlier.  Such had risen only 0.6% in the year to May.  Australia’s commodity price index rose over 2.0% last month and posted on-year advances of 51% in SDR terms and 34% in Aussie dollar terms.  Australian building permits fell more sharply than forecast in June, dropping 3.3% on top of May’s 6.6% decrease, which shaved the 12-month rate of rise to 13.2% from 26.6% the month before.

Japan’s monetary base showed accelerated on-year growth of 6.1% in July after 3.6% in June and 3.4% in 2Q10.  It was the largest gain since August 2009.

China’s non-manufacturing services purchasing managers index improved to 60.1 in July from 57.4 in June.  The manufacturing PMI, reported earlier, dipped to 49.4, the first sub-50 reading since March 2009.  Market chatter today is speculating on the possibility of a near-term hike in Chinese reserve requirements.

Brazil’s manufacturing PMI slid from 52.7 in June to an 11-month low of 51.8 in July.

J.P. Morgan’s global PMI index for manufacturing declined to an 8-month low of 54.3 in July from 55.0 in June.  Orders, production and input prices had lower readings although all above 50.0.  The employment index firmed 0.3 to 53.5.

The British purchasing managers index in construction unexpectedly fell to 54.1 in July from 58.4 in June and a 2Q average reading of 58.4 as well.

Producer prices in the euro area firmed 0.3% for a second straight time in June because of a 0.6% increase in energy.  Non-energy producer prices edged up just 0.1% and by 1.9% from a year earlier.  Overall producer prices were 3.0% higher than in June 2009.  The PPI accelerated to an annualized increase in the second quarter of 7.0% from 4.6% in the first quarter and 1.4% in the final quarter of 2009.

Turkish consumer prices fell 0.5% last month but rose 7.6% on year.  Producer prices slid 0.2% on month but rose 8.2% on year.

South Korean consumer price inflation remained at 2.6% overall and 1.7% on a core basis in July.  The CPI firmed 0.3% on month.

Spanish consumer confidence improved by 7.7 points to 73.6 last month.

South African motor vehicle sales were 20% higher in July than a year earlier.  A larger 20.7% gain occurred in June.

Scheduled U.S. data today include personal income and spending, factory orders, auto sales, and pending home sales.  Service sector PMI readings are due tomorrow from the United States and many European countries.

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



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