Dollar Drops in Wake of G20 Meeting

October 25, 2010

The dollar is trading below Friday closing levels by 1.3% against the Australian dollar, 1.0% versus the kiwi, 0.9% relative to the yen, Swissy, and Canadiand dollar, 0.6% against the euro, 0.3% versus sterling and 0.1% against the yuan.  See G20 statement review.  The communique called for reduced external imbalances but did not unveil numerical current account targets.   Finance ministers and central bankers at the meeting in Korea agreed to “refrain from competitive devaluations,” but the ink wasn’t dry before Japan’s Finance Minister Noda clarified that officials in Japan still believe that the yen has strengthened excessively and in a way not good for Japan’s economy and that the policy of taking appropriate action against such when needed remains “unchanged.”

Most stocks, but not Japan’s Nikkei, are higher.  Equities rose 3.0% in China, 1.7% in Taiwan, 1.3% in Indonesia and Australia, 1.0% in South Korea, 0.8% in New Zealand, 0.5% in Hong Kong and 0.7% in India.  In Europe, the German Dax, British Ftse, and Paris Cac show gains of 0.7%, 0.6%, and 0.5%.

Commodity prices got a boost.  Oil and gold are up 1.3% and 1.5% at $82.77 per barrel and $1345.40 per ounce.

The ten-year yields on German bunds and Japanese JGBs are unchanged, while that on British gilts slipped two basis points.

Japan’s customs trade surplus of JPY 797 billion exceeded expectations and was 54% greater than a year earlier.  Export growth of 14.4% surpassed a 9.9% rise of imports.  The surpluses versus the EU, Asia, and the United States advanced by 36.3%, 14.2% and 19.8%, respectively.  On-year growth in export volumes of 18.6% in 3Q10 was down from 33.0% in 2Q and 43.7% in 1Q.

Australian producer prices rose 1.3% last quarter, accelerating their on-year pace to 2.2% from 1.0% in the second quarter, minus 0.1% in 1Q and minus 1.5% in the final quarter of 2009.  The more important CPI, which analysts project to be below its target ceiling, arrives in two days.  Governor Stevens of the Reserve Bank of Australia said the central bank’s 2-3% price target had helped to anchor inflation expectations.

Industrial orders in the euro area shot up 5.3% in August, easily reversing a 1.8% drop in July and boosting the 12-month advance to 24.4% from 11.7% in the year to July.  Orders increased by 11.3% in Italy, 11.1% in Greece, 2.3% in Portugal, 2.1% in Spain, and 3.4% in Germany.  Drops of 6.2% and 0.4% were posted by Ireland and France.  Orders in July-April were 3.8% greater than their average second-quarter level.

British mortgage approvals fell further to 31.1K in September, an 18-month low, according to British Bankers Association figures.

Singapore consumer prices rose 0.3% in seasonally adjusted terms in July, leaving the 12-month rate of decline unchanged at 0.5%.

Interest rate decisions are awaited from central banks in Israel and Hungary later today.  Their benchmark levels currently stand at 2.0% and 5.25%.

A number of Fed officials, including Chairman Bernanke, speak today.  The Chicago and Dallas Fed manufacturing indices also get released, as do existing home sales from the whole country.

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



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