Little Change in the Dollar Ahead of U.S. Jobs Report

September 3, 2010

The dollar edged up 0.2% against the yen and the Swiss franc and by 0.1% versus the Australian and Canadian dollars.  The dollar fell 0.3% against the kiwi and by 0.1% against the euro.  The greenback is unchanged against the pound and yuan.  Market consensus calls for U.S. non-farm payrolls to drop around 100K, but opinion is by no means uniform among analysts this month.  Another focus today are the service-sector purchasing manager survey results of many economies.

Equities rose 1.4% in Indonesia where there was a surprise increase in reserve requirements.  Equities also gained 1.4% in Taiwan, 1.0% in Thailand, 1.7% in Sri Lanka, 0.8% in New Zealand, 0.6% in Japan, 0.5% in Singapore and 0.5% in Hong Kong.  The Paris Cac, British Ftse and German Dax a re trading 0.7%, 0.6%, and 0.4% higher.

Ten-year Japanese government bond yields (JGBs) climbed by a further three basis points to 1.15% and are 24 basis points above their level on August 25.  Officials in Japan continue to debate the pros and cons of currency intervention.  Ten-year German bund yields firmed two basis points.

Oil slid 0.5% to $74.63 per barrel.  Gold edged 0.1% higher to $1254.50 per troy ounce.

Hurricane Earl has weakened and will miss the Eastern United States north of N.C.  The closest pass will be to Nantucket.

Japan’s service purchasing managers index pointed to a slower pace of decline in August with a reading of 48.7, up from 46.3 in July and 47.1 in June.  However, business expectations weakened ominously to 47.4 from 49.8 in July and 52.5 in June.  Plus, the composite factory and services PMI remained below 50 at 49.5 after 48.6 in July and 49.8 in June.

China’s PMI-services hit a four-month high of 57.6 in August on quickening growth in orders.  The composite PMI score improved to 54.6 from 52.6 in July and 52.2 in June.

Hong Kong’s PMI-services advanced a full point to 52.3, the 13th reading above the 50 breakeven point.  As in many economies, there were signs of quickening input price inflation.

India reported a robust PMI-services reading of 59.3, although such was down from 61.7 in July and a two-year peak of 64.0 in June.  The composite PMI of India was 60.3 following scores of 61.9 in July and a 23-month peak of 62.8 in June.

The Russian PMI-services slumped 7.2 points to a 15-month low of 47.0, slammed by the heat wave of the century and the accompanying smog.  Russia’s composite PMI fell to 49.9 from 54.7 in July.

Australia’s PSI index for services remained below 50 for a fourth consecutive month but edged up to 47.5 from 46.6 in July.  June’s score was 48.8.  A bright spot was the jump in sales to 51.8 from 44.4 in July.

Britain’s service sector PMI provided a major disappointment at 51.1, a 16-month low and down from 53.1 in July, 54.4 in June, and a 2010 peak of 58.4 in February.  This report points to significantly slower GDP expansion in the present calendar quarter than the unexpectedly buoyant 4.5% annualized pace in 2Q.

Service sector activity in the euro area was led by Germany and France.  Other economies lag far behind.

  • Euroland as a whole posted a services PMI of 55.9, even better than July’s 55.8 and signifying almost as strong growth this quarter as last.  The composite PMI was 56.2, a tenth higher than the preliminary flash indication and only a half point less than in July.
  • Germany had elevated composite and services PMI readings of 58.4 and 57.2 in August compared to 59.0 and 56.5 in July and 56.7 and 54.8 in June.
  • The French composite PMI was 59.5, similar to July’s 59.7.  The French services reading was revised up to 60.4 from a flash 59.9.  In July, the services index had been 61.1.
  • Italy’s services PMI was 51.4, but the July-August average score of 50.5 compared with a second-quarter mean of 53.2.  Business expectations have faltered.
  • Spain recorded a sub-50 reading of 49.2 in service-sector activity for the first time since February.  Input prices leaped to a 21-month high because of a sharp VAT tax increase in Spain.
  • The Irish PMI-services fell 2.8 points to 52.9 in August, and the jobs sub-component was less than 50, signifying contraction in the labor market.

The volume of euro area retail sales edged 0.1% higher in July and was 1.1% greater than a year earlier.  Analysts had predicted a 0.2% monthly increase.

Bank Indonesia increased bank reserve requirements to 8% from 5%, which had not been foreseen.  An unchanged 6.5% key interest rate was the expected decision.

Swiss consumer prices were steady in August and just 0.3% higher than a year earlier.  That compared to a 0.4% 12-month increase in July.

Turkish consumer prices rose 0.4% last month, reversing July’s drop, boosting the on-year pace to 8.3% from 7.6%.  The PPI shot up 1.2% on month and 9.0% on year in Turkey.

Revised data showed South Korean real GDP advancing by 1.4% in 2Q10 and 7.2% compared to a year earlier.

Consumer confidence in Spain improved to a reading of 74.9 in August from 73.6 in July.

Several ECB officials were quoted on the wires overnight with a range of opinions about the regional and global economic outlook.

Investors await two big U.S. data reports: the Labor Departments monthly labor force survey and the ISM’s survey on non-manufacturing.

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

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