Dollar Keeps Softening

October 7, 2010

The dollar lost 1.2% against the Australian dollar, 0.8% versus the kiwi, 0.5% relative to the yen, 0.3% against the euro and sterling and 0.1% against the Swiss franc.  It recovered 0.2% against the Canadian dollar.  The Aussie dollar rose above its mid-July 2008 peak, and the yen overnight was as strong as 82.24/USD, less than 3% below its all-time peak hit in 1995.

China remained shut.  Foreign governments continue to urge greater yuan appreciation.

Following a strong gain on Wednesday, Japan’s Nikkei dipped 0.1% on Thursday.  Stocks rose 1.5% in Pakistan but declined by 1.3% in Sri Lanka, 1.1% in India, 0.8% in Thailand, 0.7% in Singapore, and 0.5% in Indonesia.  Stocks in Paris (0.2%), Germany (0.1%), and Britain (0.1%) show tiny gains thus far.

The yields on 10-year Japanese and German sovereign bonds each increased four basis points.  That on British gilts firmed two basis points.

Gold climbed 0.8% to $1359 per troy ounce, while oil rose 0.5% to $83.63 per barrel.

The Bank of England Monetary Policy Committee announced no policy changes and did not report anything about its latest thinking.  The Bank Rate stays at 0.5%, and the asset purchase program limit was left at GBP 200 billion.  All this is what I expected. However,

Reported British data prior to the central bank announcement revealed

  • A shocking 3.6% monthly plunge in the Halifax house price index in September.  The 12-month 2.6% rise was down from 6.9% in May.  The monthly decline is the biggest in at least 27 years and resulted in a 0.9% third quarter-over-second quarter drop.
  • That both industrial production and factory output had risen 0.3% on month in August.  For June-August, industrial production was unchanged from three months earlier after having risen by 2.0% in March-May.

The Filipino overnight central bank deposit rate was likewise retained at the record low level of 4.0%.  Still to come are the central bank decisions in Euroland at 11:45 GMT and from Peru later in the day.

The Australian dollar got a big boost from strong September labor market statistics.  The unemployment rate printed at 5.1% for the third time in four months, 5.3% in July being the exception.  Jobs increased 49.5K, even more than the average monthly gain of 34.4K during the previous five months.  Over the last half-year, employment has soared 4.0% at an annualized rate in Australia, a sharp contrast to other advanced economies with very weak labor markets.

Japan’s index of leading economic indicators fell to 99.1 in August from 100.0 in July and 100.3 in June.  Expressed as a diffusion index wherein 50 represents the breakeven point, the LEI was below that threshold for a third straight month.  The coincident and lagging indices edged mildly higher in August.

Japanese machine tool orders rose 6.8% on month in September for dropped to a 12-month advance of 112.9% from 170% in both July and August.

Taiwanese export orders were 17.5% greater than a year earlier in September after spiking to 26.6% in August from 18.2% in July.

South Korean M2 growth of 8.5% in the year to August was the lowest since August 2006.

German industrial production advanced by a greater-than-anticipated 1.7% in August and were 1.5% higher in July-August than the 2Q average level.  The second quarter had seen an annualized 23% jump in output from 1Q.  August output was 10.7% higher than a year earlier.

Norwegian industrial production fell 4.7% in August.  The Czech trade surplus narrowed very sharply to CZK 0.5 billion in August from CZK 5.5 billion in July and CZK 9.1 billion in August 2009.  Exports firmed just 0.3% on month, while imports went up 4.1%.  Czech retail sales fell 0.9% in August but were 1.1% higher than a year earlier if adjusted for variations in the number of working days.  Romanian industrial output firmed 0.1% on month when adjusted for seasonal and working day variations.  Such was 5.7% greater than a year before.

The French trade deficit of EUR 4.932 billion in August was 11.5% wider than in July.

Scheduled U.S. data releases today include weekly jobless insurance claims, and monthly readings of chain store sales, the JOLTS index and consumer credit.  Mexican consumer prices and Canadian building permits arrive, too.

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

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