A Softer Dollar

February 17, 2011

Continuing unrest and uncertainty in the Middle East has not prevented the dollar from falling 1.0% against the Swiss franc, 0.6% relative to the Australian dollar, 0.5% against the yen, 0.4% versus sterling, 0.3% against the euro and kiwi and 0.2% versus the Canadian dollar.  Dollar/yuan is steady.

The DJIA is down 0.4%.  The Ftse is off 0.2%, the Dax is steady, and the Paris Cac is up 0.3%.  Earlier, stocks fell 1.0% in Hong Kong, 0.8% in Singapore, and 0.2% in South Korea but firmed 0.2% in Japan and Thailand and by 0.7% in Indonesia and 0.4% in India.

Yields on 10-year Treasuries, German bunds and British gilts fell six, five and four basis points.  Those on JGBs firmed two basis points.

Oil has edged only 0.1% higher in spite of Iran’s attempt to move warships through the Suez.  Gold is 0.5% stronger.

U.S. CPI inflation was higher than expected last month, rising 0.4% on all items, 2.1% on energy, 0.5% on food and 0.2% on the non-food, non-energy core index.  The 12-month rate of increase rose to 1.6% overall and 1.0% excluding food and energy.  FOMC minutes from the meeting in late January that were released yesterday showed policymakers still comfortable with the present dovish policy stance.

The Philly Fed manufacturing index improved much more than forecast to 35.9 in February from 19.3.  A similar report from the New York Fed two days ago had also been higher at 15.43 after 11.92 in January and expectations of 15.

U.S. jobless insurance claims popped back above 400K to 410K last week, leaving the four-week average at 417.75K versus 416K per week during the previous four weeks to January 15.  The underlying level was at 453.25K in the four weeks to October 23rd after a trendless pattern earlier in 2010.  The U.S. index of leading economic indicators only rose 0.1% last month after advancing by 0.8% in December.

Japan’s index of leading economic indicators rose 0.8 points to 101.4 in December.  As a diffusion index, the LEI surpassed the 50-breakeven level for the first time since last May, corroborating the view of BOJ officials that Japan is emerging from its decelerating phase.  Japan’s coincident index advanced 1.1 points. 

Real GDP in Singapore rebounded 3.9% last quarter and posted an on-year advance of 12.0%, beating even China’s stellar pace.

New Zealand’s business purchasing managers index continued its recent improvement in January, rising 1.5 points to 53.7.  Producer output inflation accelerated to 4.3% in 4Q from 4.0% in 3Q.

The impact of harsh December weather in Europe was indicated in Euroland’s 1.8% plunge that month in construction output.  Construction was 12.0% weaker than a year earlier and posted a 2.3% 4Q-versus-3Q decline.

The euro area’s current account deficit widened to a seasonally adjusted EUR 13.3 billion in December from EUR 10.5 billion in November, EUR 9.6 billion in October and EUR 4.8 billion per month in 3Q.  The unadjusted “Basic Balance,” which combines the current account and long-term capital movements, was in surplus in 2010, but at EUR 53.1 billion such was sharply smaller than the EUR 140.5 billion in 2009.

In Britain, the Conference of British Industries released results of its February survey of industrial trends, which showed an eight-point improvement to minus 8, including the best indication for export orders in over 15 years.  Andrew Sentance of the Bank of England said a rate increase might boost sterling and thereby counter imported inflation.

Sweden’s jobless rate rose to 7.9% in January from 7.4% in December.  Swedish CPI inflation picked up to 2.5% in January from 2.3% in December.  Norwegian mainland GDP (excluding offshore oil) expanded 0.3% on quarter and 1.6% on year in 4Q10, a sharp slowdown from the 3Q pace.  Total GDP recovered 2.4% after dropping 1.5% in 3Q.  Total GDP went up only 0.4% in 2010, but mainland GDP expanded by 2.2% last year.

The ZEW expectations index for Switzerland, a gauge of investor sentiment, improved 1.2 points in February to minus 17.2.

Canadian wholesale turnover rose 0.8% in December and by 5.8% from a year earlier.

Fed Chairman Bernanke endorsed recent financial sector reforms.

Copyright Larry Greenberg 2011.  All rights reserved.  No secondary distribution without express permission.

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