Weaker Euro

April 14, 2011

The dollar rose 0.4% against the euro and is 1.0% stronger than yesterday’s low of 1.4523/EUR.  The dollar also advanced 0.4% against the Canadian dollar, 0.2% relative to the Australian dollar and 0.1% against the kiwi.  The dollar lost 0.6% against the yen and 0.2% relative to sterling and the Swiss franc.  The yuan is unchanged.

Equity prices are down 0.8%, 0.6%, and 0.5% in Paris, Frankfurt, and Tokyo but steady in London.  Stocks fell 1.0% in India, 0.9% in Malaysia, 0.8% in Singapore where monetary policy was tightened, 0.4% in Hong Kong and 0.3% in South Korea.

The yields on 10-year British gilts, German bunds and Japanese JGBs slid by five, four and two basis points.

Oil prices eased 0.3% to $106.77 per barrel, while gold prices recovered 0.2% to $1,457.80 per troy ounce. Silver is hovering above $41/ounce and just marginally below its recent 31-year peak.

The risk play is off today.  Investors learned that temperatures at the Fukushima reactor have climbed and observed widening euro zone bond yield peripheral spreads.  Ten-year Greek bond yields climbed above 13.0% for the first time since 1998.  Portuguese 10-year yields are 550 basis points greater than bunds, up from 519 bps two days ago. 

G7 finance ministers meet in Washington today.  Tomorrow G20 officials get together.  There’s speculation that resources to fund forex intervention are being built up.

Leaked Chinese data that were due Friday point to a need for further policy tightening in that country.  The leak came out of Hong Kong.

  • Chinese reserves rose $197.4 billion last quarter to $3.0147 billion.  The increase was nearly the same as a gain of $199 billion in the final quarter of 2010.  The quarterly gain was 29% greater than analysts assumed and left reserves nearly three times greater than Japanese reserves.
  • CPI inflation in China accelerated to between 5.3% and 5.4%, higher than expectations of a 5.2% reading and up from 4.9% in February and 3.1% in March 2010.  PPI inflation rose to 7.4% in March from 7.2% in February, 5.9% in December and 4.3% last September.  Again, acceleration surpassed analyst forecasts.
  • 679.4 billion yuan were loaned in March versus forecasts of CNY 600 billion and an increase in February of CNY 535.6 billion.
  • M2 growth accelerated to 16.6% from 15.7% in February instead of slowing to 15.2% as expected.  M1 rose 15.0% on year after 14.5% in February.
  • Industrial production was 14.8% greater than a year earlier in March compared to a projected increase of 14.0%.
  • Retail sales growth accelerated to 17.4% on year after dipping to 11.6% in February from 19.1% in December and January.

Germany’s finance minister suggested Greece will have to restructure its debt.  His remarks echo a warning from the S&P credit agency.  Smaghi of the ECB said that would hit regional banks very hard, and a top IFO Institute officials warned of risks to Spanish banks.  The released monthly ECB Bulletin rehashes what President Trichet said at last week’s press conference.

As it did in a year ago and last October, the Monetary Authority of Singapore will permit greater appreciation in the Singapore dollar.  MAS runs monetary policy through manipulation of the exchange rate rather than by changing interest rates.  Officials re-centered the mid-point of the SGD’s U.S. dollar trading band upward but did not put such above the current spot rate.  The currency has risen 3.5% since the last semi-annual review of monetary policy.

Reuters released new monthly readings of its proxy index for the Bank of Japan’s Tankan measure of business confidence.  The April readings were much lower than those in March.  The manufacturing score was minus 13 versus plus 15 in March, and respondents predicted a further decline to minus 18 by July.  The non-manufacturing index slumped to minus 15 in April from +3 in March and February, and such is seen falling to minus 22 by July.  The earthquake and ongoing radiation threat have truly hammered business and household sentiment.  Japan appears to be in recession.

Japanese stock and bond transactions last week generated a JPY 71 billion outflow after a Y 1.456 billion inflow in the cusp week between 1Q11 and 2Q11.  Tokyo condominium sales in March were 6.3% greater than a year earlier.

Australian motor vehicle sales rose 3.4% last month but were 1% lower than a year earlier.  A gauge of Australian expected inflation over the coming 12 months eased to a four-month low of 3.5% from 3.6% in March.  The strong Aussie dollar had been the main dampening factor.

British consumer confidence recovered to +44 according to the Nationwide index in March from a low of +39 in February.  The Swiss ZEW index of investor expectations rallied to +8.8 in April from minus 13.5 the month before.  Dutch retail sales volume rose 0.8% in February.  Greek unemployment worsened to 15.1% in January from 11.3% a year earlier. Finnish consumer price inflation held steady at 3.3% last month.  Hungarian industrial production advanced 0.9% in February and 14.3% from a year earlier.

Scheduled U.S. data today include monthly producer prices and weekly jobless insurance claims.  Canada will be releasing the monthly manufacturing survey results and motor vehicle sales figures.  Plosser, Kocherlakota, Lacker, Duke, and Tarullo of the Federal Reserve will be speaking.

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

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