An Unscheduled Press Conference in Japan

August 12, 2010

There’s been lots of attention on the yen after such touched a 15-year high of 84.75/USD on Wednesday.  A Bank of Japan official confirmed the central bank had been checking market yen rates earlier today and warned that disorderly movements could hurt Japan’s economy.  At an unscheduled press conference, Finance Minister Noda stuck to the Group of Seven party line that it is excessive market volatility, not any particular currency levels, that officials wish to avoid.  The yen traded overnight between 85.80 and 84.93 and presently shows no further net change.

The dollar otherwise rose 0.5% against the kiwi, 0.4% against sterling, and 0.3% relative to the euro and Australian dollar.  The greenback dipped 0.4% against the Swiss franc and 0.1% against the Canadian dollar.  The Chinese yuan slid 0.1% against the dollar.

Stock markets fell in the Pacific Rim and got further bad news in Europe from a weaker-than-anticipated Euroland industrial production report.  Equities fell by 1.2% in Australia and China, 0.9% in Japan, 0.8% in Singapore, Taiwan and Pakistan, 2.1% in South Korea, and 1.0% in New Zealand.  The German Dax and British Ftse are off 0.2%.

Ten-year Japanese JGB and German bund yields each eased another basis point.

Oil prices softened 1.0% to $77.28 per barrel and are 6.4% lower than a closing level of $82.56 on August 3rd.  Gold strengthened 0.5% to $1204.7 per ounce.

Euroland industrial production slipped 0.1% in June, with drops of 1.6% in France, 0.7% in Greece, 0.5% in Germany, and 0.3% in Spain.  Analysts were forecasting a 0.7% advance.  Production still expanded at a robust 10.3% annualized rate between 1Q and 2Q, but the 12-month increase slowed to 8.2% from 9.9% in May.

The Bank of Korea left its key seven-day repurchase rate at 2.25%, which was the expected decision.

Australian July labor statistics showed a surprising two-tenths rise of the jobless rate to 5.3%, most since April, a decent 23.5K increase in employment despite a 4.2K drop in full-time workers, a 0.5% decline in hours worked, and a 24.6K advance in the number of unemployed workers.

New Zealand’s business purchasing managers index fell six whole points to 49.9 in July, the first sub-50 reading since in eleven months.

India’s on-year rate of industrial production slowed even more than expected, printing at 7.1% after 11.5% in June and 8.3% in May.  The 2Q on-year increase was 11.6%, up from 3.9% in the year to the first quarter.

Revised Japanese industrial production data showed a smaller 1.1% drop in June.  A decline of 1.5% had been reported originally.  Output growth slowed to 1.5% in the second quarter from 7.0% in 1Q10.  Production in June was 17.5% greater than a year earlier.  The inventory ratio was 1.7% lower in June and down 17.0% from the June 2009 level.  Capacity usage fell 2.1% in the latest month, a sign of mounting slack.

Italian consumer prices rose 0.4% last month and were 1.7% higher than a year earlier.  Spanish consumer prices fell 0.4% in July and were 1.9% greater than in July 2009. Swedish consumer prices slid 0.3% lower on month and 1.1% higher on year in July with a 12-month core inflation rate of 1.7%.

Greece has a full-blown recession as officials scramble to restore fiscal credibility.  Real GDP slumped by 1.5% on quarter in 2Q and by 3.5% from a year before.

Norwegian real retail sales eased 0.1% in June and recorded on-year growth of 2.9%, down from 3.0% in May.  Italy’s trade deficit widened to EUR 3.1 billion in June from EUR 2.0 billion in May.  Switzerland posted a CHF 64 billion current account surplus in 2009 after a CHF 10 billion surplus in 2008.  The released August ECB Bulletin rehashes what President Trichet said at last week’s press conference.

Currency traders await the release of U.S. import prices and weekly jobless insurance claims and will take their cue from whether equities stabilize or augment yesterday’s sharp downward break.

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

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