Broad-Based Dollar Losses

April 21, 2011

The dollar fell overnight by 0.9% against sterling, 0.7% versus the Canadian, New Zealand and Australian dollars, and 0.5% against the yen, Swiss franc and yuan.  The dollar hit its weakest levels since December 4, 2009 against sterling, December 15, 2009 against the euro, and February 27, 2008 against the kiwi.  Record lows were set against the Swiss franc and Australian dollar.  The trade-weighted dollar was last as weak as now in August 2008, just shortly before the collapse of Lehman Brothers.  Confidence in the U.S. currency has been hit by the recent lack of verbal or policy support for it from Washington officials.

In appears that intervention may have occurred to cap strength against the U.S. dollar of the won, ringgit, and baht.

Stocks rallied further, rising 1.1% in Australia, 1.0% in Hong Kong, 1.6% in Taiwan, 1.2% in South Korea, 0.9% in Singapore, and 0.7% in India, China  and The Philippines.  The German Dax is also up 0.6%, while the Paris Cac and British Ftse show more modest gains of 0.4% and 0.1%.

Ten-year Japanese JGBs and British gilts are unchanged.  The German bund yield firmed two basis points, however, preserving a 10-basis point spread versus U.S. Treasuries.

Oil and gold prices each climbed 0.6% to $112.08 per barrel and $1507.70 per troy ounce.

The IFO Institute’s index for Germany’s business climate slid for a second straight month, printing at 110.4 in April after 111.1 in March and 111.3 in February.  Current conditions actually improved in both months, but expectations fell to 104.7 from 106.5 in March and 107.8 in January and February.  Expectations are little changed from a reading of 104.2 in April 2010.  The recent slide was concentrated in retail and wholesaling activity.  IFO’s sister business climate index for services recovered to 28.9 in April from 28.0 in March and 33.0 in February.

ECB President Trichet reiterated that no decisions beyond this month’s rate hike had been decided but also spoke confidently about a self-sustaining economic recovery that seemingly points to more rate increases ahead.

Britain reported better-than-expected retail sales but another big budget deficit for March.  Retail sales volume firmed 0.2% that month and 1.3% on year.  Such posted on-quarter and on-year gains in the first quarter, a period that saw value added taxes jump to 20% from 17.5%,  of 0.3% and 2.4%.  The U.K. recorded a GBP 24.8 billion public sector net cash requirement in March alone.  Public sector net borrowing (excluding interventions) amounted to GBP 18.6 billion in March and GBP 141.1 billion last fiscal year.  Such had been as large as GBP 156 billion in fiscal 2009-10.

Swiss M3 posted on-year growth in March of 7.1% after 7.3% in February. Dutch joblessness remained steady at 5.1% in March.  Ireland’s trade surplus increased 33% on month in February. 

Revised Japanese data put its index of leading economic indicators in February at 104.2, up from 101.6 in January and 100.3 in December.  The coincident index was also improving shortly before the March Sendai earthquake, printing at 106.8 after 105.6 in January and 103.9 in December.

Hong Kong consumer price inflation accelerated to 4.6% in March from 3.7% in February.

The Bank of Brazil raised its Selic rate by 25 basis points late yesterday to 12.0%.  See review. 

Australian producer prices increased last quarter by a greater-than-forecast 1.2% and accelerated to an on-year pace of 2.9% from 2.7% in 4Q10.  According to the National Australia Bank survey, business confidence improved to +11 in 1Q11 from +5 in the final quarter of 2010, but business conditions remained soft with a reading of just +2 for a second straight quarter.  New Zealand credit card spending in March was 1.5% higher than a year earlier.

With numerous centers closed for Good Friday including trading in U.S. Treasuries, a slew of North American data releases are awaited today, including U.S. weekly jobless insurance claims, the monthly Philly Fed index, the U.S. index of leading economic indicators, the FHFA house price index, and Canadian retail sales.  Turkey’s central bank will announce the decision of its latest policy meeting.

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

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