Weaker Dollar at End-Quarter

March 31, 2011

The dollar fell overnight by 0.6% against the euro, 0.4% versus the Swiss franc, 0.2% against the Canadian dollar, and 0.1% relative to the yen, kiwi, Aussie dollar, yuan, and sterling.  The dollar has lost 5.8% against the euro since the end of 2010.

Most Asian equities rose overnight, with gains of 1.0% in Indonesia, 0.9% in Malaysia, 0.8% in the Philippines and India, 0.7% in South Korea, 0.5% in Japan and Sri Lanka, and 0.3% in Australia and Hong Kong.  China’s bourse fell 1.0%, however, and stocsk are down 0.4% in Paris and 0.1% in Great Britain.  The German Dax is unchanged.

The yield on ten-year British gilts fell three basis points, while that on 10-year JGBs firmed a basis point to 1.26% and Japan’s fiscal year ended.  German bunds are steady.

Oil and gold prices advanced 0.9% and 0.4% to $105.22 per barrel and $1431.00 per troy ounce.

Euroland data released today strengthened the case for an ECB rate hike next week.

  • On-year March CPI inflation in the common currency area accelerated to 2.6%, 0.7 percentage points above the target ceiling, from 2.4% in February, 2.3% in January, 2.2% in December, 1.9% in November, 1.4% in March 2010 and 0.6% in March 2009.
  • After dropping in 4Q10, the volume of German retail sales was 0.6% greater than its 4Q level and up 1.8% on year.
  • French domestic PPI inflation jumped 0.8% last month and accelerated to a 12-month 6.3% advance from 5.4% in the year to January.
  • French debt rose to 81.7% of GDP last quarter from 81.5% in 3Q10 and 78.3% in the final quarter of 2009.
  • Italian PPI inflation rose from 5.1% in January to 5.8% in February, most in three years.
  • German unemployment plunged 55K in March compared to a forecast drop of 25K.  The jobless rate was 7.1%, down form 7.3% in February and 8.0% in March 2010.  Unemployment declined 129K seasonally adjusted between December and March.  Jobs in February were 1.3% greater than a year earlier, representing an accelerating climb from an on-year advance of 0.8% in the year to 3Q10.

Taiwan’s central bank raised its key interest rate by another 12.5 basis points to 1.75%.  The tightening had been expected.

Japan’s earthquake was reflected in the country’s purchasing managers index, which swung from 52.9 in February to a reading of 46.4 in March.  Scores below 50 denote contracting activity.

Japanese housing starts and construction orders in pre-quake February posted on-year gains of 10.1% and 19.5%.  Stock and bond transactions in the week of March 26 generated a net 1.047 trillion yen outflow.

Australian retail sales rose 0.5% last month and by 2.3% from February 2010.  The number of building permits fell by 7.4% last month and by 17.4% on year.  Private credit expanded 0.5% on month and 3.4% on year in February.  New Zealand on-year M3 growth accelerated to 5.2% in February from 4.3% in January, but a measure of business sentiment in New Zealand reflected very sharp deterioration in response to the second earthquake to hit the South Island in just a few months.  Such printed at minus 8.7 last month versus plus 34.5 in January.

The British Nationwide house price index rose 0.5% in March and 0.1% on year.  Both comparisons were better than forecast.  U.K. consumer confidence stagnated at minus 28 in February.  A quarterly Bank of England survey found British credit conditions to be easing moderately.

South Korean industrial output sank 2.3% in January after climbing 2.8% in December.  Retail sales volume in Hong Kong was 14.7% higher in January-February than a year earlier.  Thai business sentiment slid to 52.3 in February from 52.8 the month before.  Malaysian M3 growth slowed to 7.9% on year in February from 8.8% in January.

Turkish GDP advanced by 3.6% on quarter and a greater-than-expected 9.6% on year in 4Q10.  Turkey’s trade deficit widened to USD 7.4 billion in February from $7.3 billion in January.  South African producer prices accelerated more sharply than expected, rising 6.7% in the year to February after a 12-month advance of 5.5% in January.

Revised Danish GDP showed a drop in 4Q10 of 0.4% after a 1.7% increase in 3Q.  GDP was 3.0% higher than in the final quarter of 2009.  Norwegian retail sales volume increased 0.7% last month and 2.5% on year.  Norway’s M2 money stock was 6.5% higher than in February 2010.  The Irish trade deficit moved in to EUR 2.8 billion in January from EUR 3.1 billion in December.  Greek retail sales plunged 16% on a volume basis in the year to January.  Spain’s EUR 6.5 billion current account deficit in January was two and a half times wider than December’s imbalance.

Many officials speak today: Lacker, Tarullo and Pianalto from the Fed, Weber from the Bundesbank, German Finance Minister Schaeuble, Miles from the Bank of England, and Eurogroup Chairman Jean-Claude Juncker.  French Finance Minister Lagarde already has predicted better currency policy coordination by governments after calling recent capital movements “brutal.”

Scheduled U.S. data include weekly jobless claims with benchmark revisions, industrial orders, the KC Fed index, and the Chicago and Milwaukee regional PMI-manufacturing indices.  Canadian monthly GDP data will also be reported.  Another wintry storm is bearing down on the Northeast corridor of the United States.

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

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