Dollar Slips Against Yen, Euro, and Swiss Franc

August 16, 2010

The dollar lost 1.3% against the Swissy, 0.7% relative to the yen and 0.5% versus the euro.  The greenback is steady against the Canadian dollar and sterling but up by 0.5% against the kiwi, 0.2% against the Australian dollar and 0.1% versus the Chinese yuan, which has retreated past 6.8000 per dollar.

Market chatter about Chinese diversification away from the dollar could be heard on this mid-August Monday. 

The major data release involved very disappointing Japanese 2Q GDP.  See review.  Japanese GDP advanced 0.4% at a seasonally adjusted annual rate (saar) and by 2.0% between 2Q09 and 2Q10.  The GDP deflator was 1.8% lower than a year earlier.  In comparisons of 1Q to 2Q, consumption edged 0.1% saar higher.  Non-residential investment climbed 1.9% saar, but residential spending fell by 5.0%.  Exports soared 25.9% saar, while inventories exerted a 0.7 percentage point drag on the GDP growth rate.  Current government consumption and investment dropped 1.8% saar.

The Nikkei tumbled immediately after the Japanese GDP figures were released but pared its losses to 0.6% later in the session.  Equity prices jumped 2.3% in China, which overtook Japan as the second largest economy.  Stocks otherwise in the Pacific Rim fell 2.9% in Pakistan, 0.7% in India, 0.5% in Australia and 0.2% in Singapore and South Korea, but gains of 1.5%, 0.6% and 0.2% occurred in Sri Lanka, Taiwan and Hong Kong.  In Europe, the Paris Cac, British Ftse and German Dax have lost 0.7%, 0.3%, and 0.1%.

Ten-year sovereign bond yields fell by five basis points in Great Britain and three basis points in Japan and Germany, the latter to a mere 0.96%.

Oil and gold prices firmed 0.3% and 0.6% to $75.63 per barrel and $1224.20 per troy ounce.

Japan’s tertiary index, a supply-side measure of service sector activity, edged 0.1% lower in June after a 0.8% drop in May.  The index fell 0.2% in 2Q10 and was only 0.8% higher in June than a year earlier.  June’s level was already 0.3% below the 2Q average.

Consumer prices in the euro area fell 0.3% on month in July, largely on a 9.7% seasonal drop-off in clothing.  The 12-month pace of CPI inflation rose to 1.7%, the most since November 2008, from 1.4% in June and 1.6% in May.  Core inflation ticked up to 1.0% from 0.9% in both May and June but remained below the 1.2% price rise in the year to July 2009.

Indian wholesale prices slid unexpectedly to a six-month low of 9.97% in the 12 months to July from 10.55% in June and 11.14% in May.  A rate increase at next month’s Reserve Bank of India meeting still seems probable.

Australian motor vehicle sales fell 2.6% last month but were 11.6% greater than in July 2009.

Norway’s trade surplus of NOK 28.4 billion in July compares to NOK 25.5 billion in June and NOK 30.0 billion in July 2009.  The January-July surplus was 2.7% wider than a year earlier.

Consumer confidence in Turkey slid 0.6% in July after rising 1.7% to a 30-month high in June.  The 87.48 level of the index remains well below the 100 dividing line between optimism and pessimism.  Turkish unemployment of 11.0% in May was down from 13.6% a year earlier.

British Rightmove house prices faltered 1.7% in August.  Czech producer prices were steady in July and up 2.3% on year, the most in 21 months. 

Scheduled U.S. data include the Treasury Department’s capital flow report (a.k.a. the TIC data), the National Association of Home Builders index, and the New York Fed manufacturing survey index.  Canada reports existing home sales.

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

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