Dollar Gains as Week Draws to a Close

May 15, 2015

The dollar advanced broadly overnight, appreciating by 1.3% against the Swiss franc, 1.1% relative to the Australian dollar, 0.5% versus the euro and loonie, 0.8% vis-a-vis the kiwi, 0.4% against the yen, 0.2% versus sterling and o.1% against the yuan.

The Japanese Nikkei climbed 0.8%, but share prices fell 1.8% in China, 0.7% in South Korea, and 0.4% in Indonesia. In European markets, the German Dax and Spanish Ibex have slipped 0.4% and the Greek market has lost 2.2% of its value.

Ten-year Japanese sovereign debt yields fell five basis  points.  The 10-year Treasury and British gilt yields are four basis points lower, and the 10-year German bund has shed three bps.

West Texas Intermediate crude oil dropped 1.5% to $58.97 per barrel.  Comex gold is 0.8% weaker at $1,215.90 per troy ounce.

On the central banking front,

  • Bank of Japan Governor Kuroda boasted that quantitative and qualitative monetary stimulus undertaken thus far has generated the same impact as a nominal interest rate cut of 250 basis points.  Kuroda claimed that the drop in inflation will be temporary, asserting that in most respects such as measures of expected inflation QQE has worked pretty much as intended.
  • The Bank of Chile retained a 3.0% main interest rate.  That’s been the level since a 25-basis point cut last October.
  • The Reserve Bank of Peru interest rate was kept at 3.25%, its level since a 25-bp reduction this past January.
  • The Bank of Korea’s 7-day repo rate was maintained at its record low of 1.75%.  CPI inflation of 0.4% is at a 15-year low, but officials feel that the economy is recovering modestly.

U.S. industrial production contracted 0.3% in April.  Such was the fifth straight month-on-month decline and left the 12-month increase at just 1.9%.  Factory output was unchanged on month and 2.3% higher on year.  Overall industrial capacity usage slid 0.4 percentage points to 78.2%, having ended 2014 at a loftier 79.5%.

The Empire State manufacturing index returned to positive ground in March, rising 4.28 points to +3.09.  That’s still 6.86 points under the end-2014 level, however.

The U. Michigan/Reuters index of consumer sentiment unexpectedly slumped 7.3 points to a 7-month low of 88.6, according to a preliminary reading for May.

The Treasury Department will be releasing U.S. capital flow data later today.

Earlier in Asia, Japan reported a 2.1% April on-year decline in domestic corporate goods prices.  The deterioration from +0.7% in the year to March reflected the elimination of last year’s consumption tax hike from the 12-month rate of change.  The drop of 2.1% was the most deflationary reading in 20 months.  Export prices fell 4.5% on year, while import prices plunged 17.8%.

Japanese consumer confidence eased to a 2-month low of 41.5 in April from a reading of 41.7 in March but was above the low of 37.0 in April 2014.

Retail sales in Singapore in March were weaker than expected, recovering 1.1% on month but only to 2.1% above the year-earlier level.  Indonesia posted a $3.85 billion current account deficit in the first quarter of 2015, down from $5.67 billion in the previous quarter.

Malaysian GDP grew 1.2% between 4Q14 and 1Q15.  On-year growth edged down by only 0.1 percentage point to 5.6%.  Real GDP in Hong Kong rose considerably less strongly, 2.1%, in the same one-year time span.

The Swiss index of producer and import prices in April dived 2.1% on month and 5.2% on year in yet another sign of persistent deflationary headwinds.  Domestic PPI fell 1.6% on month and 3.5% on year.

U.K. construction output jumped 3.9% on month in March and surpassed its year-earlier level by 1.6%.  But the British index of leading economic indicators revealed a loss of steam in March, edging just 0.2% higher.  The index of coincident economic indicators also rose just 0.2%.

Polish GDP expanded 3.5% in the year to 1Q15.  On-year Czech GDP growth of 3.9% was twice as much as anticipated and the strongest advance since the year to 2Q08.

Norway’s trade surplus plunged sharply to a record low in April of NOK 1.16 billion.

Canada’s March survey of manufacturing sales, orders, and inventories was reported.  Sales increased 2.9% on month but just 0.3% on year.  Orders and inventories were respectively 1.5% and 0.1% greater than in March 2014.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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