Weaker Yen and Dollar

April 6, 2011

The dollar climbed above JPY 85.0 for the first time since last September 24, edging up 0.2%.  The dollar otherwise lost 1.0% against the Swiss franc, 0.8% versus the kiwi, 0.5% relative to the Australian dollar and euro, and 0.3% against the Canadian dollar.  The greenback is unchanged against sterling and the yuan.

Stocks in the Pacific Rim advanced 1.7% in Taiwan and Vietnam, 1.2% in China, 1.1% in Indonesia, 0.8% in Singapore, 0.6% in Hong Kong and 0.3% in Australia.  But equities fell 0.3% in Japan and by 0.4% in India.  In Europe, the German Dax and British Ftse have traded up 0.6% and 0.5%, and the Paris Cac edged up 0.1%.

Gold has advanced 0.5% to a new record high of $1460.40 per troy ounce, while oil settled back 0.2% to $108.14 per barrel on news of petroleum exports resuming from Libya by the rebels.  The leak at the Fukushima nuclear power facility in Japan has reportedly been stopped.

The yields on 10-year JGBs and German bunds firmed two and one basis points.  That on British gilts fell two basis points after a significantly worse-than-forecast U.K. industrial production report.

The main focus is on tomorrows interest rate announcements by the European Central Bank, Bank of England, and Bank of Japan.

British industrial production fell 1.2% in February, the largest on-month decline since August 2009, and its on-year rise of 2.4% was down from 4.2% in January and the lowest such has been in seven months.  Factory output was unchanged on the month and recorded a 12-month 4.9% rate of increase, down form 6.6% in the year to January.  Analysts had expected industrial production to post a rise of nearly 0.5%.

The Halifax index of British house prices edged up only 0.1% in March after declining 0.9% in February.  Prices in 1Q11 were 2.9% lower than a year earlier, which is worse than an on-year drop in 4Q10 of 1.6%.  The on-year house price index had crested last May at +6.9%.  British shop price inflation settled back to 2.4% in March from 2.7% in February.  Today’s U.K. data cast new doubt on the sustainability of positive economic growth and will make Bank of England officials again hesitant to raise interest rates to counter high inflation.

ECB officials will have no such reservations, especially in the wake of the latest batch of German industrial orders data.  Total orders rose 2.4% in February on top of a 3.1% increase in January, leaving the January-February level 3.6% above the 4Q10 mean.  Domestic and export orders for capital goods advanced by 4.6% each.  Germany’s construction purchasing managers index inclined further to 61.8 in March from 60.7 in February, 55.5 in January and a weather-related low of 36.0 in December.  The March reading was the best since at least September 1999.

The final estimate of Euroland GDP growth in the final quarter of 2010 showed unchanged increases of 0.3% from 3Q and 2.0% from a year earlier.  Monthly data point to a GDP rise in the first quarter of 2011 of 0.7-0.8%.

The Swiss franc was lifted by higher-than-forecast Swiss CPI data, showing a 0.6% monthly advance in March and a doubling of the 12-month rate of climb to 1.0%.  The Swiss monetary authorities had retained a very loose monetary policy as inflation had previously been running below expectations.

Spanish industrial production growth accelerated to an on-year advance of 3.6% in February from 2.9% in January.

Japan’s index of leading economic indicators increased 2.7 points to 104.2 in February, best since May 2006.  The coincident and lagging indices rose by 0.4 and 2.3 points, respectively, to 106.3 and 91.0.  All this shows is that Japan was starting to gather positive momentum before the Sendai earthquake, and we already knew that.

The number of owner-occupied mortgage loans in Australia fell 5.6% in February.  The value of mortgage loans was 4.0% less than in January.

Hong Kong’s service sector purchasing managers index printed at 54.9 in March following 53.7 in February and 55.2 in January.

The HSBC service-sector PMI for China edged 0.2 lower to 51.7, weakest since end-2008, but the composite PMI improved to 52.7 from 51.9 in February.

The latest on-year rates of Taiwanese CPI and WPI inflation for the month of March are 1.4% and 5.5%.

Iceland’s trade surplus widened 32.6% in February to ISK 10.3 billion.  In contrast, the Czech trade surplus narrowed 21.2% to CZK 13.8 billion in the same month.

J.P. Morgan’s estimated global purchasing manager indices for services weakened to 54.0 in March from 59.2 in February, and its composite PMI reading was 54.7, down from 59.2.  These declines mainly reflected very sharp drops in Japan’s components.  The silver lining in the latest reading was the resilience of new orders.

No major U.S. data are scheduled, just weekly oil inventories and mortgage applications.  Lockhart of the Fed will be speaking. Canada’s IVEY-PMI index and Britain’s monthly GDP forecast will be released.

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

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