Mixed Dollar

September 9, 2010

The dollar advanced 0.4% against sterling and 0.2% versus the Swiss franc.  The greenback is also steady against the euro and down by 0.8% against the Australian dollar, 0.5% against the kiwi, 0.3% against the yen and loonie, and 0.1% vesus the Chinese yuan.

Equities in the Pacific Rim fell by 1.8% in China but rose 1.0% in Australia.  In between, stocks climbed 0.8% in Japan, 0.7% in India, and 0.4% in Indonesia and Hong Kong but slid by 0.3% in Thailand and New Zeanad and by 0.2% in Taiwan.  In European trading, stocks show gains of 0.8% in France and Britain and 0.6% in Germany.

Persistent concerns that European banks are going to need more capital sent 10-year British gilt and German bund yields up three basis points.  The 10-year JGB yield settled back a basis point.

Oil prices firmed 0.6% to $75.08 per barrel, while gold edged down 0.2% to $1255.30 per troy ounce.

Australia reported surprisingly strong labor market figures that sent the Aussie dollar higher.  The jobless rate fell to 5.1% in August from 5.3% in July, and jobs advanced by 30.9K thanks to a 53.1K increase in full-time workers.  Employment has not slowed, having gained 3.3% annualized over the past four months which is similar to the 3.2% on-year increase.

The notable finding from a quarterly Ministry of Finance survey of Japanese corporations was a projected decline in sentiment among big manufacturers to zero by yearend from 13.3 at present.  There is concern about the elevated yen.  So far, no Japanese foreign exchange intervention has been detected, but markets are on alert to that possibility.  Heavy Chinese buying of Japanese government bonds has been a prime reason for the yen’s strength and the very low yield on those securities.

Japanese consumer confidence slid 0.8 points to 42.5 in August and was also 0.3 points lower than the 2Q10 average level.

The Bank of Korea unexpectedly failed to lift its seven-day 2.25% repo rate.

The final release of German August consumer prices showed no change month-on-month on an unadjusted basis but a 0.1% uptick when seasonally adjusted.  On-year inflation settled back to 1.0% from 1.2% in July, 0.9% in June, and 1.2% in May.  Over the past six months, however, consumer prices firmed 1.5% at an annualized rate.

The Bank of England did not change policy.  Some analysts thought an announced increase in the Gbp 200 billion asset purchase program limit was a possibility.

Britain’s trade deficit widened sharply in July.  The merchandise deficit climbed 15.1% to GBP 8.667 billion from GBP 7.532 billion in June as export volume slid 0.9% while import volume rose by 2.7%.  The deficit was even greater than May’s GBP 8.100 billion and surpassed the 2Q monthly average of GBP 7.7 billion.  The goods and services trade deficit of GBP 4.919 billion was more than a billion pounds above consensus forecasts and 25% wider than June’s shortfall.

Swedish consumer prices were unchanged in August and up 0.9% on year.  On-year increase in the CPIF and CPIX indices amounted to 1.4% and 1.1%.

French jobs rose 0.2% or 24K in the second quarter.

Czech CPI inflation remained at 1.9% in August for a second consecutive month, the highest since March 2009. 

President Obama continues to resist pressure to extend the Bush tax cuts on the wealthy.

U.S. and Canadian trade figures are due at 12:30 GMT.  Canada also will be reporting housing starts and home prices.  The U.S. releases weekly jobless insurance claims.  Central bank rate announcements are expected from South Africa and Peru

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

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