European Currencies Stronger against Dollar and Yen

March 2, 2011

The dollar fell 0.4% against the euro and Swiss franc and 0.3% relative to sterling.  The greenback is unchanged relative to the Canadian and Australian dollars as well as the yen.  The dollar has risen 0.7% versus the kiwi and 0.1% against the yuan.  Middle Eastern buying of euros has been reported.  Libya is closer to civil war.

Equities extended yesterday’s losses.  Stocks dived 2.4% in Japan, 1.5% in Hong Kong, 1.3% in Singapore, and 1.2% in Taiwan and Sri Lanka.  The Paris Cac is also down by 1.2%, while the German Dax and British Ftse so far show losses of 0.9% and 0.8%.  Australian stocks declined 0.5%.

At $1434.00 per ounce, gold has eclipsed the December record high and is 0.2% above yesterday’s close.  Oil also has firmed 0.2% and is hovering near the psychological $100 per barrel level.  Markets are increasingly worried that elevated energy prices may stunt the global economic expansion and send some economies back into recession.

The ten-year JGB yield relapsed four basis points to 1.28%, while ten-year German bunds and British gilts are steady.

The Bank of Japan had a JPY 130.1 trillion balance sheet at the end of February, up from JPY 128 trillion at end-January and JPY 128.7 trillion at end-2010.  Japan’s monetary base posted on-year growth of 5.6% in February, similar to January’s 5.5% but less than the 7.0% increase in the final quarter of 2010.

Australian GDP advanced 0.7% last quarter, accelerating from a downwardly revised 0.1% increase in 3Q10.  On-year growth held steady at 2.7%.  New single home sales rose 2.2% in January.

Central bank announcements are awaited today from Poland and Brazil.  Fed Chairman Bernanke reprises his Humphrey-Hawkins testimony before the somewhat hostile House Financial Services Committee at 15:00 GMT.

The JP Morgan global purchasing managers index for manufacturing improved to 57.8 in February from 57.1 in January and 55.6 in December.

The Brazilian factory-sector PMI index rose to 54.6 in February from 53.1 in January, 52.4 in December and 49.9 in November.

The South Korean manufacturing PMI slipped to a still-robust 53.4 in February from 53.5 in January, 53.9 in December, 50.2 in November and 46.7 in October.

South Korean consumer prices jumped 0.8% last month, accelerating to a 4.5% 12-month rate of rise from 4.1% in the year to January.  It was the highest on-year pace since November 2008.  Core inflation of 3.1% was the most since August 2009.  The Bank of Korea didn’t tighten policy at its February meeting, confounding analysts, but next week’s meeting could have a different outcome.

Thai consumer price inflation slid to 2.9% in February from 3.0% in January.  Core CPI picked up two-tenths to 1.5%.  South African auto sales growth accelerated to 25.2% on year last month from 18.6% in January.

Euro area producer prices leaped 1.5% in January, raising the on-year advance to 6.1% from 5.3% in December and 3.6% in August.  Energy prices jumped 3.2% on month and 12.5% on year.  All other producer prices went up by 0.8% and 3.9% on year, including a 1.6% advance of intermediate goods (+7.4% from January 2010).  This report plausibly points to a hawkish ECB press conference tomorrow.  After rise 1.1% last quarter — an annualized 4.5% pace — the PPI in January was already 2.2% above the average 4Q10 level.  12-month rates of PPI inflation stand at 5.5% in Germany and France, 6.8% in Spain, 6.7% in Greece, 8.1% in Finland, 9.0% in Belgium, and 10.3% in The Netherlands.

Polish GDP expanded 0.8% last quarter and 3.9% from the final quarter of 2009.  That was down from a 4.6% advance in the year to 3Q10.  Romanian producer price inflation increased to 10.0% in January from 9.6% in December.

Sweden’s current account surplus widened 11% last quarter to SEK 53.3 billion.  Norway’s current account surplus of NOK 91.0 billion was NOK 22 billion greater than in 3Q10.  Norwegian retail sales slid 0.1% on month and 0.2% on year in volume terms in January.

In addition to Bernanke, the Fed’s Hoenig and Lockhart also have speeches today, and the U.S. central bank will be publishing its Beige Book.  Scheduled North American data releases today include the ADP estimate of private-sector jobs, the Challenger survey of U.S. job cuts, weekly U.S. mortgage applications and energy inventories, Canadian producer prices and Canadian raw material prices. 

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

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