All-Time Record Low in Dollar/Yen

March 17, 2011

The yen strengthened to a new historic high of 76.25 per dollar before the Asian open, breaking the old peak of 79.85 reached April 19, 1995.  At 78.35/USD, Japan’s currency still shows a net overnight advance of some 2%.  An unnamed source claims that G7 finance ministers and central bankers plan a conference call at 22:00 GMT to discuss the Japan crisis.  The risk here is that expectations of a currency stabilization package are not met.

The battle to prevent a meltdown of the Fukushima nuclear reactor continues.  High Japanese government officials called the yen’s rise speculative, denying evidence of repatriations thus far.  Minutes released from the Bank of Japan’s mid-February policy meeting pre-date the earthquake and contain only the usual promise to do appropriate actions to support growth and rid the nation of deflation.  This past Monday, the BOJ eased but not as dramatically as the situation would seem to warrant.

In European news, Spain’s auction of 10-year paper was better subscribed than the prior month’s auction but yielded only a minor reduction in average yield to 5.16%.  The Swiss National Bank as expected left its target for 3-month Libor at 0.25%, and Euroland construction orders rebounded 1.8% in January after falling 3.5% in 3Q10 and by 2.6% in the final quarter of last year.

The dollar has also recorded overnight losses of 0.9% against the euro, 1.0% relative to the Swiss franc, and 0.7% against sterling.  It’s done better against commodity-sensitive currencies, easing just 0.2% against the Aussie and Canadian dollars and climbing 1.1% versus the kiwi.  It edged 0.1% higher against the yuan.

Asian stocks got clobbered, but European bourses are doing better.  Equities fell 1.8% in Hong Kong, 1.6% in China and the Philippines, 1.4% in Japan, 1.3% in Indonesia, 1.1% in India and 1.0% in Singapore.  The Paris Cac, German Dax, and British Ftse are trading 0.7%, 0.5%, and 0.4% higher, in contrast.

The yields on 10-year German bunds and British gilts firmed three and four basis points, while JGB yields slipped two basis points.

Oil jumped 1.5% to $99.46 per barrel.  The Japanese nuclear reactor accident is seen harming nuclear power projects in many countries, thereby increasing reliance on fossil fuel energy.  Gold is 0.4% higher at $1402.00 per ounce.

Japan’s tertiary index, which measures service-sector activity, advanced by a solid 2.1% in January after dropping 0.9% in December and 0.2% in 4Q10.  Alas, the more recent earthquake changes near-term growth prospects dramatically.

The Reserve Bank of India increased its repo and reverse repo rates by 25 basis points each to 6.75% and 5.75%.  The moves were expected and not accompanied by a change of reserve requirements. 

In Switzerland, where the central bank did not change its ultra-low 0.25% key interest rate target, industrial production jumped 7.4% in the final quarter of 2010 and by 6.1% from a year earlier.  The quarterly rise some 50% greater than forecast.  The Swiss ZEW index of investor sentiment improved 3.7 points to minus 13.5 in March.  Swedish unemployment dipped to 7.9% in February from 8.2% in January.  Dutch unemployment held at 5.1% last month.  Finnish PPI inflation printed at 7.0% last month after 7.2% in the year to January. Icelandic CPI inflation edged up to 2.3% from 2.2% in January.

On-year growth in Hungarian industrial output accelerated to 10.7% in January from 5.9% in December.  Greek unemployment increased to 14.2% last quarter from 12.4% in 3Q10.  Despite their 1.8% monthly rise, Euroland construction orders were 4.5% lower in January than a year earlier.

South African wholesale turnover was 6.5% greater than a year earlier in January.  Non-oil Singaporean exports rose 2.9% last month but posted a smaller 7.8% on-year increase after 21.0% in the year to January.  Hong Kong’s jobless rate eased two-tenths to 3.6% in December-February.

The U.S. releases several meaningful economic statistics today: industrial production and capacity use, consumer prices, the index of leading economic indicators, the Philly Fed manufacturing index, and weekly jobless insurance claims.  Canada reports international long-term capital flows and wholesale turnover.

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

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