Japan’s Finance Minister Elevates Yen Warning

August 25, 2010

The yen is 0.5% lower after Finance Minister Noda warned of “appropriate action” against strengthening yen.  Overnight yen highs were at 83.88 per dollar and 105.86 per euro prior to the remark.

The dollar otherwise is unchanged against the euro, Canadian dollar and sterling, off 0.1% relative to the Swiss franc and Australian dollar and up 0.3% against the kiwi.

Concerns about faltering world demand sent depressed equities by 2.6% in Taiwan, 2.4% in China, 1.7% in Japan, 1.4% in Australia, 1.5% in South Korea, 0.7% in Thailand and 0.6% in New Zealand.  In Europe, the Paris Cac, Britiish Ftse and German Dax have eased 0.4% , 0.3%, and 0.2%.

Oil steadied at $71.62 per barrel after of week of declines.  Gold firmed 0.4% to $1238.10 per troy ounce.

Standard and Poors downgraded Ireland’s credit rating to AA- from AA.  The news sent the two-year Irish bond yield up 31 basis points to a 3-month high of 3.13%.  After Tuesday’s sharp drop in Treasury yields, ten-year sovereign bond yields eased by four basis points in Britain and two bps in Germany and Japan.

Japanese corporate service prices fell by 0.4% in July and recorded a larger-than-forecast 1.2% on-year drop.  The Bank of Japan’s 123.5 trillion yen balance sheet as of August 20th was 6.1 trillion yen greater than the end-July level of assets.  Japan’s customs trade surplus of JPY 804 billion in July was 120% wider than a year earlier and bigger than forecast.  On-year export and import growth rates were 23.5% and 15.7%, respectively.  The seasonally adjusted trade surplus of JPY 610 billion was 18.6% larger than in June but showed declines in both exports (1.4%) and imports (3.5%).

German business sentiment improved by more than anticipated in August according to the latest IFO business climate survey.  The overall index rose a half point to 106.7 and compared to readings of 101.9 in June, 98.3 in March, 94.7 last December, and 90.5 in August 2009.  All of the latest month’s rise resulted from a 1.4-point advance in current conditions.  The expectations component settled back 0.4 points after rising 3.1 points in July.  The retail sector reading rallied to 9.1 from 3.8 in July and minus 9.8 in June.  Manufacturing improved by 1.7 points to 20.1, as export growth remains very robust.

The IFO Institute’s German service sector survey also produced better results, with an overall reading of 20 after 18 in July, 15.5 in June and 1.4 in August 2009.

German construction orders were only 0.3% higher than a year earlier in June, masking a 14.2% advance in building construction.

The Bank of Thailand, which implemented an initial rate hike on July 14, announced a second 25-basis point increase to 1.75% and signaled more moves to come.  The tightening had been anticipated.

Norwegian joblessness held steady at just 3.5% last quarter.  Retail sales in Hungary slid 0.1% in June and by 4.6% from a year earlier.

South African CPI inflation slowed for a seventh consecutive month, dropping to 3.7% in July from 4.2% in June.  A 0.6% monthly increase in consumer prices was less than forecast.

The gauntlet of disappointing U.S. data continues.  Today the United States will be releasing figures for durable goods orders, oil inventories, new home sales, and the FHFA house price index.  Markets anticipate another bad number Thursday for new jobless insurance claims.  Revised GDP figures due Friday will show a sizable downgrade from the initial estimate, reflecting less favorable net exports and inventories.

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

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