Yen Weakens to a Six-Week Low

May 2, 2017

The yen is down 0.3% on balance after touching an overnight low of 112.32 per dollar, its weakest value since March 21.

  • Japan’s services purchasing managers index and composite PMI slipped to 2-month lows of 52.2 and 52.6 in April from 19-month peaks set in March.
  • On-year growth in Japan’s monetary base slid under 20% to 19.8% in April, having grown 21.4% in the first quarter, 25.0% in calendar 2016 and 34.0% in calendar 2015.
  • The Bank of Japan balance sheet rose 7.6 trillion yen in April to 497.7 trillion yen, over 90% of GDP. Such was JPY 476.5 trillion at the end of 2016.
  • Released minutes from the BOJ Board’s mid-March policy meeting reiterated the view that core inflation will rise eventually to 2% and that quantitative stimulus not end until then.
  • BOJ Governor Kuroda remarked that an Asia infrastructure bank led by China is desirable.

The dollar otherwise slipped 0.2% against the Swiss franc and 0.1% versus the euro, loonie, kiwi, and peso. The yuan is steady, and the Aussie dollar eased 0.2% against its U.S. counterpart.

The Reserve Bank of Australia as expected retained a record low 1.5% Official Cash Rate, issuing a statement that again expressed a desire that the Aussie dollar not appreciate.

Ten-year sovereign debt yields in Germany, the U.K., Japan and the U.S. edged up a basis point. 10-year bond yields rose even more sharply in Italy, Spain and Switzerland but fell considerably in Greece.

Share prices are mostly higher in Asia and Europe. Stocks closed up 1.1% in Singapore, 0.7% in New Zealand, Taiwan, and South Korea, and 0.6% in Japan. In Europe where most markets were closed yesterday for May Day, equities have risen 2.8% in Greece, 0.7% in Spain, 0.5% in Switzerland, 0.4% in France, Britain and Italy but just 0.1% in German. Japanese markets will be shut the rest of this week for the Golden Week holidays.

Two provocative remarks from U.S. President Trump are that his administration is looking into a reimposing Glass-Steagallesque legislation to break up large bank and that he’s willing to meet North Korea’s leader.

West Texas Intermediate crude oil recovered 0.7% to $49.19 per barrel. Gold edged up 0.1% to $1,256.40 per ounce. Industrial metal prices eased.

A slew of manufacturing purchasing manager survey results were reported. Note that values above 50 imply improving conditions, and vice a versa. A greater value in April than March implies either a faster rate of expansion or slower rate of contraction.

  • Economies that had a higher PMI in April than March include South Korea (a 4-month high of 49.4), Indonesia (a 10-month high of 51.2), Malaysia (above 50 at 50.7 for the first time in over 10 months), Poland (a 2-month high of 54.1), Spain (a 2-month ¬†high of 54.5), Greece (a 4-month high of 48.2), Italy (a 73-month high of 56.2), Ireland (a 3-month high of 55.0), Great Britain (a 3-year high of 57.3), France (a 72-month high of 55.1), and Euroland (a 6-year high of 56.7).
  • Economies that a lower PMI reading in April compared to March were China (a 7-month low of 50.3), The Philippines (a 3-month low of 53.3), Thailand (a 5-month low of 48.8), Russia (a joint 9-month low of 50.8), Turkey (a 2-month low of 51.7), Sweden (a 2-month low of 62.5), Norway (a 2-month low of 54.7), Switzerland (a 2-month low of 57.4), Germany (a 2-month low of 58.2), Taiwan ( a 6-month low of 54.4), and Denmark (at 46.5, which is the first sub-50 score since August 2014).
  • And economies with unchanged PMI readings include India (52.5), The Czech Republic (57.5), and Hungary (55.9).
  • In most but not all cases, inflationary pressure eased.

Unemployment in the euro area held steady at 9.5% in March. That’s still 0.7 percentage points lower than a year earlier.

German labor statistics in March were again strong. The jobless rate eased 0.1 of a percentage point to a new low for the move of 5.8% (3.9% on an ILO basis). The number of unemployed workers fell 30K in March and by 74K in the first quarter, and employment recorded on-year growth of 1.5% last quarter, up from 1.3% in the prior quarter and 1.2% last summer.

Consumer price inflation in South Korea slipped 0.3 percentage points to 1.9% in April. Core inflation also eased. On the other hand, Indonesian CPI inflation rose to 4.2% from 3.6%, although core held pretty steady. Producer prices in Thailand rose 1.7% in the year to April, a drop from 2.6% in March.

Still ahead: the release of the New York area PMI, known as the NAPM index.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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