Further Weakening of Japanese Yen

October 22, 2012

The dollar has climbed 0.6% against the yen but fallen by 0.4% versus the euro and kiwi, 0.3% against sterling, 0.2% relative to the Swiss franc and 0.1% vis-a-vis the loonie.  The Australian dollar and Chinese yuan are unchanged.

The Hong Kong Monetary Authority sold local currency against the U.S. dollar, its first intervention since 2009 to defend the Hong Kong dollar’s fixed exchange rate regime.  The currency has been pegged since 1983.  Hong Kong consumer price inflation ticked upward to 3.8% in September from 3.7% in August.

Share prices have a better tone than on Friday.  Such closed mixed in the Pacific Rim where stocks rose 0.7% in Hong Kong, 0.6% in India, 0.4% in China and 0.1% in Japan but fell by 0.7% in Australia and 0.5% in Taiwan.  Equities are up 0.8% in Italy, 0.2% in France and Spain, 0.1% in Britain but unchanged in Germany.  U.S. stock futures are higher.

Ten-year British gilt and German bund yields have risen by three and two basis points respectively.  Spanish sovereign debt yields also climbed.

Oil and gold prices are up 0.6% at $90.58 per barrel and $1725.50 per ounce.

Japanese customs clearance exports recorded a whopping 10.3% on-year drop in September (most since February 2011), whereas imports were up by 4.1%.  The season.  The seasonally adjusted trade deficit widened to JPY 980 billion from JPY 462 billion in August and JPY 372 billion in July.  Exports posted on-year declines of 21.1% to the European Union and 14.1% to China.  Exports to the United States were 0.9% higher than in September 2011.

The Bank of Japan published its quarterly branch managers report, which showed a worsening assessment in eight of the countries nine regions.  This was the most sizable quarter-to-quarter deterioration in three years.  Governor Shirakawa reiterated that activity is paused and inflation will hover near zero for the time being.  Concern was expressed about the yen.  The semi-annual price and activity report is due at the end of October and likely to be accompanied by the unveiling of new stimulus.

The Bank of Japan’s Senior Loan Officer survey indicated stronger corporate loan demand in the summer but an expected decline in the present quarter.  Household credit was flat in 3Q and also seen likely to weaken in 4Q.

Department store sales in Japan posted a smaller 0.2% on-year dip in September, while supermarket sales recorded a larger decline of 2.0%.

New Zealand markets were shut for Labor Day.

In Australia, the government released its mid-fiscal year economic and fiscal outlook.  Projected growth in 2012-13 was revised down a quarter percentage point to 3.0%, and new spending cuts were announced to assure that the goal of a budget surplus is secured.  The projected size of the surplus was trimmed to A$ 1.08 billion from A$ 1.5 billion that had been projected last May.  Australia’s central bank is seeking more timely information on mortgage-backed securities involved in its repo operations.

Moody’s completed a review of Taiwan’s sovereign debt rating, keeping such at Aa3 with a stable outlook.  Taiwanese unemployment held steady at 4.3% last month.  Malaysian unemployment fell to 2.8% in August from 3.2% in both July and August 2011.  Land prices in China rose just 1.77% in the year to 3Q12; the pace of increase has slowed five straight times. 

Regional elections in Spain over the weekend resulted in Prime Minister Rajoy’s People’s Party picking up three extra seats in Galicia, which he declared to be a sign that austerity is the correct fiscal strategy.

Swiss reserves increased $25.17 billion last month.  The Swiss National Bank buys euros to ensure that the franc doesn’t appreciate past 1.2000 per euro.  Swiss on-year M3 money growth accelerated to 8.9% in September from 8.3% in August.

Germany’s index of leading economic indicators fell by 0.3% in August according to the Conference Board, while the index of coincident indicators was unchanged.  Both results were worse than seen in July.  Danish retail sales advanced 1.0% in September but were 1.4% lower than in September 2011.  Icelandic wage inflation slowed to 5.7% in September from 5.9% in August.  The Greek current account surplus widened to EUR 1.6 billion in August from EUR 680 million in July.

The third and final Obama-Romney debate will be held tonight in Boca Raton, Florida.  No U.S. data releases are scheduled today.  The Bank of Canada makes an interest rate policy announcement tomorrow.  The prior statement had a more hawkish tone.  The 1.0% overnight rate has been at that level since September 2010.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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