Dollar Eased as Overnight Data Came in Mixed

August 23, 2011

The dollar lost 0.8% against the yen, 0.4% relative to the New Zealand and Canadian dollars, 0.3% versus the euro, and 0.2% against the Swissie and Aussie dollar.  The U.S. currency is unchanged against the yuan and sterling.

Stocks are mostly higher with gains of 3.9% in South Korea, 3.3% in Taiwan, 2.2% in Australia, 2.0% in Hong Kong, 1.6% in China, France and Germany, 1.2% in Japan and Singapore, 1.1% in Britain and Indonesia and 1.0.% in India.  Stocks fell 1.0% in Thailand and 0.5% in Pakistan.

Ten-year sovereign debt yields are higher, with gains of five basis points in Germany and Britain and two bps in Japan.

Oil prices advanced 1.3% to $85.55 per barrel, defying expectations that a rebel victory in Libya will send such lower.  Gold prices edged 0.2% lower to $1888.60 per ounce.

Some market tension was alleviated by the Chinese preliminary purchasing managers survey results, which showed an unexpected increase in the manufacturing index to a two-month high of 49.8 in August from 49.3 in July.  Price components of the report were more alarming, however.

Flash euro area PMIs also arrived.  Although not quite as bad as feared, they confirm a nearly stalled economy in 3Q11.  The composite Ezone index remained at 51.1, lowest since August 2009.  Manufacturing dipped under the no-change 50.0 threshold to 49.7, a 23-month low and down from a 58.0 reading in April.  Services edged down to a 23-month low of 51.5 from 51.6 in July.  Business confidence in the service sector plunged, and orders contracted for the first time in two years. 

  • The German flash composite PMI dropped another whole point to a 25-month low of 51.3 from 52.3 in July, 56.3 in June, 57.1 in May, and 59.2 in April.  March’s sizzling 60.4 score is now a distant memory.  The manufacturing and service PMI scores in August were 52.0 and 50.4.  Business confidence shrank for the first time since April 2009.
  • The French composite index of 53.6 was 0.4 points better than July-s 23-month low but well below readings of 59.1 in March, 62.4 in April and 60.3 in May.  Manufacturing sank to a 25-month low of 49.3, whereas services recovered 1.9 points to a 2-month high of 56.1.  Business confidence in services weakened by the sharpest degree since 2008.

The German and Euroland ZEW indices of investor sentiment were shockingly bad.  Germany’s expectations index printed at minus 37.6 after minus 15.1 in July, minus 9.0 in June and plus 3.1 in May.  Current conditions softened from 90.6 in July to a reading of 53.5 in August.  The euro area expectations index plunged to negative 40 from minus 7.0 in July, while the index for current conditions swung to minus 19.1 from +2.3 in the prior month.

The British CBI survey of industry produced a pleasant surprise, recovering to a reading of +1.0, same as June’s score, from minus 10 in July.  The number of mortgage loans, according to the British Bankers Association, rose to 33.42K in July from 32.12K in June and 30.80K in May.

The German index of leading economic indicators rose 0.8% in June after a 0.5% in May but will no doubt show deterioration in subsequent months.

Singapore CPI inflation accelerated to a six-month high of 5.4% in July from 5.2% in June.  South Korean department store sales were 8.5% larger in July than a year earlier.

The Swiss trade surplus widened 59% on month to CHF 2.82 billion in July despite a 3.0% decline in export volumes.  Ireland’s trade surplus of EUR 4.08 billion in June was 7.7% bigger than May’s surplus. 

Danish consumer confidence weakened this month to negative 2.2 from minus 0.6 in July and +3.0 in June.  Finland had a 6.9% jobless rate in July.

On-year growth in Japanese machine tool orders in July was revised up two-tenths to 34.8%.  A gauge of New Zealand expected inflation over a 2-year horizon was 2.9%.  Taiwanese industrial output in July was up by a less-than-expected 3.9% from a year before. 

Deputy Governor Battelino of the Reserve Bank of Australia said the Aussie dollar is more or less priced appropriately.  While noting more intense global financial market volatility than at the start of August, he said Australian banks are not having trouble acquiring funds.

Japanese officials intervened verbally again today.  Finance Minister Noda is a front-runner to succeed Prime Minister Kan next week.

Scheduled U.S. data to be released today include new home sales and weekly chain store sales.  Canada will be reporting retail sales.  Central bank meetings are occurring in Hungary, Turkey, and Poland.  A preliminary reading on Euroland consumer sentiment is also due.  Traders continue to speculate on what actions Fed Chairman Bernanke might unveil when he speaks Friday at the Jackson Hole annual symposium.

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

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