Continuing Selling Pressure on Brazilian Currency

September 24, 2015

Having punched through the four per dollar threshold for the first time just two days ago, the battered Brazilian real sank to as low as 4.1795 earlier today.  This 36% year-to-date decline on top of a 12+% slide in 2014 has intensified since S&P downgraded Brazil’s credit rating to junk status earlier this month.

The Central Bank of the Republic of China’s latest quarterly review of monetary policy led to a 12.5-basis point cut of Taiwan’s central bank interest rate to 1.75%.  That’s the first change since five consecutive increases of 12.5 basis points each from June 2010 to June 2011.  Today’s action is intended to stimulate demand.

The Central Bank of Norway’s deposit rate has been cut to 0.75%, a record low.  The previous reduction from 1.25% to 1.00% was in June, and the rate has now been lowered by 125 basis in total since December 2011.  As an oil producer, Norway is having to cope with the plunging price of energy. 

The Filipino central bank overnight borrowing and lending rates were left unchanged at 4% and 6%, and reserve requirements also were not changed at the latest monetary policy meeting.  Those levels have been maintained since September 2014.

The Czech central bank also holds a policy meeting today.

Mixed German data were reported today.  The pleasant surprise involves this month’s IFO business climate survey, whose forward-looking expectations component jumped 0.9 points to a 5-month high of 103.3, offsetting an 0.8-point drop in current conditions to 114.0 and enabling the overall business climate index of Germany to edge up to a 4-month high of 108.5 in September from 108.4 in August, 108.0 in July and 107.5 in June.  Retail, wholesaling and construction all improved, while manufacturing weakened.  IFO Institute officials said the German economy “is proving robust.”

A separate German release of consumer confidence by GFK, however, revealed deterioration to an 8-month low of 9.6 in September from readings of 9.9 in August, 10.1 in June and July, and 10.2 in May.

Overall business sentiment in France retained a reading of 100 in September, as manufacturing improved a point to a 49-month high of 104 but services dropped two points to a 2-month low with a score of 97.

Atlanta Fed President Lockhart became the latest Fed rebel voice to say that the Federal funds rate ought to be raised no later than the December meeting.  Markets are having a hard time dealing with FOMC meeting after FOMC meeting that keeps the rate steady, while the weight of individual officials speaking their own views in public indicate mounting urgency to tighten.  Janet Yellen also speaks publicly today.

Although China’s Shanghai Composite equity index recovered 0.9% today, stock markets fell by 2.3% in Indonesia, 0.9% in Taiwan, 0.8% in Singapore, 0.6% in Hong Kong and, most importantly, 2.8% in Japan which reopened for the first time this week.  In Europe, stocks are down 0.6% in Germany, 0.4% in France, 0.7% in Switzerland, 0.3% in Italy, and 0.2% in Spain.  The British Ftse is steady.

The dollar declined overnight by 0.7% against the New Zealand dollar, 0.4% versus the Swiss franc, 0.3% relative to the yen, and 0.2 vis-a-vis the euro and sterling.  The U.S. currency rose 0.6% against its Australian counterpart and 0.1% versus the yuan.

Ten-year Japanese JGB and British gilt yields have risen by two and one basis points, respectively.  The German bund is level.

West Texas Intermediate oil recovered 1.1% to $44.97 per barrel.  Comex gold rose 0.4% to $1,134.66 per ounce.

Japan’s all industry index, a monthly supply-side estimate of economic activity, firmed 0.2% in July but was still 0.3% below its average second-quarter level.  Construction jumped 2.8% in the latest month, but industrial production fell 0.8%.  A 0.2% increase in services matched the growth of the all industry measure.

Japan’s manufacturing purchasing managers index fell 0.8 points to a weaker-than-forecast 3-month low of 50.9 in September.  Orders rose at the slowest pace in seven months.  Export demand contracted at the fastest rate in 31 months.

Japanese supermarket sales posted a 2.0% on-year increase in August, very similar to July’s 1.9% gain.

Japanese Prime Minister Abe declared deflation to be almost gone.  Really?

Italian industrial orders grew more slowly in July, 0.6%, than in June (3.0%) but were 10.4% higher than a year earlier.  Italian retail sales increased 1.7% on year in July, same as in the year to June.

The year-over-year drop in Swedish producer prices of 1.4% last month was more than twice the size of that in July.  Swedish overall economic sentiment improved in September despite a 1.1-point decline in consumer confidence to a reading of 98.7.  Finnish producer prices fell 2.2% in the year to August.

The British Bankers Association estimated the number of mortgage loans in August at 46,743, 0.9% greater than in July and the most since January.

Scheduled U.S. data to be reported today are new home sales, durable goods orders, the Chicago Fed National Activity Index, and weekly jobless insurance claims.  Janet Yellen delivers a lecture today.  Canada releases weekly wage earnings.

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

Tags: , ,


Comments are closed.