Somewhat Firmer Dollar

February 6, 2013

The dollar has strengthened 0.8% against the Aussie currency, 0.6% versus the Swiss franc, 0.4% relative to the euro, 0.3% against the kiwi, 0.2% vis-a-vis the loonie and 0.1% against the yen and pound.  The yen touched overnight lows of 94.07 per dollar and 127.74 pr euro.  The Aussie dollar hit a 2-month low of USD1.0296.

Interesting quotes overnight from BOJ Board member Sato and ECB Governing Council member Liikanen.

  • While saying that a cheaper yen is not enough to hit a 2% inflation target, Sato also remarked that cutting interest rates is a policy option.
  • Liikanen said the ECB has no exchange rate target for the euro.

Two central banks announced decisions not to change benchmark interest rates. Sedlabanki of Iceland, which had hiked its 7-day collateralized rate in November by 25 basis points to 6.0%, retained that level for the second subsequent meeting in a row but spoke of a normalizing phase in which the timing of further rate hikes will be influenced in part by the performance of the krona.  The central bank’s policymakers are prepared to intervene to support the krona.  At the Czech National Bank, the 2-week repo rate was left at 0.05% as expected.  It was cut by 20 bps to that level in early November.

Polish central bank policymakers also will be announcing an interest rate decision today.

Japan’s Nikkei shot up another 3.8% and closed at 11,464, its highest level since September 2008.  The weak yen policy is doing wonders for Japan’s stock market, which has soared 32.4% since November 13.

In other Pacific Rim markets, equities fell 1.2% in Malaysia and 0.6% in the Philippines but rose 0.8% in Australia, 0.5% in Hong Kong and 0.2% in China.  In Europe, stocks have gained 0.5% in Britain but lost 0.7% in Italy, 0.5% in France, 0.3% in Spain and 0.2% in Germany.

The price of WTI crude oil slid 0.6% to $96.04 per barrel. Gold is unchanged at $1672.80 per ounce.

Ten-year Japanese JGB and German bund yields are down two basis points each, while the 10-year British gilt yield has eased a single basis point.

New Zealand markets were closed for Waitangi Day.

German industrial orders advanced 0.8% in December but still remained 0.1% lower than month than the 4Q average level.  Orders rose 1.0% last quarter but fell by 1.8% between December 2011 and December 2012.  Domestic orders for capital goods, a leading indicator of German business investment, climbed 2.6% in December on top of a 1.5% increase in November.  This is another item in a string of signs that the economy is reverting to positive growth this quarter.

The German construction purchasing managers index printed in January at 47.7, 4.4 points higher than in December and signifying the slowest rate of contraction since August.

Retail sales in Australia, on the other hand, were disappointing, dropping 0.2% in December after dips of 0.2% in November and 0.1% in October.  Retail sales volume last quarter edged just 0.1% higher from  a lackluster 3Q.

Britain’s Halifax house price index dipped 0.2% on month in January but was 1.3% higher than a year before in November-January.  New car sales in the U.K. were 11.5% higher than a year before in January.  British shop price inflation slowed to just 0.6% in January from 1.5% in December according to the British Retail Consortium.

Czech industrial production posted a larger 12.5% on-year drop in December than analysts were expecting.  Output was 3.9% lower in 4Q than a year earlier and fell 1.2% in 2012 as a whole.  Construction output dived 17.3 on year in the final month of 2012.

The Fitch credit rating agency reassigned the Dutch rating outlook to “negative” from “stable.”

Austrian wholesale price inflation of 1.6% in January was down from 2.7% in December and the slowest pace since July 2012.

U.S. data releases today are low level indicators — weekly oil inventories and mortgage applications.  The Canadian IVEY-PMI is due.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

Tags: , ,


Comments are closed.