Dollar Sets New 2013 Highs against Several Key Currencies

March 8, 2013

Investors’ appetite for risk was fortified today by China’s trade figures and the U.S. Labor Department jobs report.

1.2955 per euro, JPY 96.57, CHF 0.9547 and 1.4885 per pound constitute new dollar highs in 2013 reached today.  The dollar since Thursday’s close has risen 1.3% versus the yen, 1.0% against the kiwi and Swiss franc, 0.9% relative to the euro, and 0.4% against the Aussie dollar and sterling.  The greenback has slipped 0.2% against the Canadian and Chinese currencies.

Japan’s Nikkei advanced another 2.6% today.  At 12,284, such has shot up an amazing 41.8% since November 13.  Other Asian markets were up 1.4% in Hong Kong and India, 0.7% in Taiwan, and 0.5% in New Zealand and Indonesia.  Stocks in Europe have risen 2.6% in Spain, 1.3% in Italy, 1.0% in France, and 0.4% in Germany and Britain.

Ten-year Treasury and British gilt yields are four basis points higher.  The equivalent German bund has moved three basis points, but the 10-year Japanese JGB is off three bps.

The price of WTI crude oil is unchanged at $91.59 per barrel. Gold has risen 0.4% to $1580.90 per ounce.

NYU professor Roubini has made another doom and gloom pronouncement, which failed to deter investor confidence.  There was a time not long ago that markets took a dive each time he spoke.

U.S. nonfarm payroll employment grew 236K last month, beating analyst forecasts by about 70K and even exceeding more optimistic whisper numbers circulating in the marketplace before today’s announcement.  December-January jobs were revised down by a combined 15K.  The unemployment rate fell unexpectedly by 0.2 percentage points to 7.7% , lowest since end-2008.  Private-sector jobs grew 246K, and the 12-month advance in average hourly earnings stayed at 2.1%.

Canadian labor statistics reinforced the rosier North American labor market picture.  Jobs rebounded from a 21.9K setback in January with a 50.7K jump in February, which is equivalent to a 387K in the bigger U.S. labor market.  Canadian employment has advanced 1.9% during the past year, and the jobless rate is at 7.0%.

A 1.2% monthly climb in U.S. wholesale inventories in January was the most in thirteen months.

China posted a $15.25 billion trade surplus in February, but the big story there was a 21.8% increase of exports, which was more than double expectations and only slightly less than January’s outsized 25.0% advance.  Imports, by contrast, were 15.2% lower than in February 2012.  Chinese trade flows in early months of each calendar year tend to be distorted by the lunar new year holiday.

Several Japanese economic indicators were released.

  • Real GDP growth in 4Q12 was revised to an annualized 0.2% uptick from a dip of 0.4% reported initially, underlining other evidence that the economy has emerged from recession.  GDP was 0.5% higher than in 4Q11.  Inventories exerted a 1.0 percentage point drag on last quarter’s GDP growth, which augurs well for future quarters.
  • The economy watchers index, a gauge of service-sector worker perceptions of activity, jumped to 53.2, best since April 2006, in February from readings of 49.5 in January, 45.8 in December and 40.0 in November.  The outlook component scored a 57.7 in February, up from 41.9 in November.
  • The non-seasonally adjusted current account deficit of JPY 365 billion in January compares to JPY 456 billion a year earlier.  The seasonally adjusted current account coincidentally was also JPY 365 billion in size but as a surplus and larger than January surplus of JPY 115 billion.
  • In the first twenty days of February, there was a JPY 936 billion customs trade deficit versus a shortfall of just JPY 74 billion a year earlier.  Imports surged 21.1% on year, while exports were 2.9% smaller.
  • The Bank of Japan’s monthly assessment of the economy contained an upgrade for the third consecutive time.  The improvement had been revealed in Thursday’s post-BOJ meeting statement.

Central banks in Peru, Sri Lanka, and Mexico announced interest rate decisions after scheduled policy meetings.

  • Peru’s main interest rate was left at 4.25% for the 22nd straight time.  It’s last change was a 25-basis point hike in May 2011.  The decision was expected.  Inflation is behaved.
  • Sri Lanka’s 9.5% reverse repo rate and 7.5% repo rate were not changed, either.  Those levels have been maintained since a 25-bp reduction in December.  Earlier in 2012, the rates were lifted by 50 bps in February and 25 bps in April.  Inflation of 9.8% is elevated, but monetary officials expect such to settle back in the second quarter and beyond.
  • The newsworthy action came in Mexico, where the key rate unexpectedly was reduced by 50 basis points to 4.0%.  This first reduction since 2009 was made after inflation dropped below the ceiling of a 2-4% target corridor and amid Mexico’s slowest economic growth in four years.  Indicators of both demand and output have been lately on the low side.

The Bank of France reported that business sentiment in industry improved to a 96 reading in February from 95 but that sentiment in services dropped two points to 88.  The central bank projects positive economic growth this quarter, albeit of just 0.1% after the 0.3% dip last quarter.

Europe’s ongoing headwinds were underscored in disappointing German industrial production data.  Overall production and factory output were unchanged and down 0.2% respectively.  Industrial production recorded a larger 12-month 1.3% rate of decline after dropping 0.5% in the year to December. 

Spanish industrial production was 5.0% lower in January than a year before.  Likewise for the same month, Swedish output dropped by 7.8%, while Turkish production went up by 1.9%.  Swiss consumer prices were 0.3% lower in February than a year before.  Brazilian CPI inflation picked up slightly to 6.3%.  Hungary and Iceland posted on-year GDP growth of negative 2.7% and positive 1.4% last quarter. 

Labor productivity in Canada edged just 0.1% higher last quarter and was 0.9% lower than in 4Q11.  Unit labor costs rose 0.8% from 3Q.  In calendar 2012, productivity also edged up 0.1%, while unit labor costs climbed 2.5%.

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

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