Weaker Dollar This Monday

February 26, 2018

The U.S. and Canadian dollars fell overnight by 0.5% against the yuan, kiwi, and sterling, 0.3% relative to the euro and Australian dollar, 0.2% versus the Swiss franc and 0.1% vis-a-vis the yen. The dollar also lost ground against several emerging market currencies. It’s 0.8% softer, for instance, against the Russian ruble.

February 26th happens to coincide with a landmark date in modern dollar history. On this day in 1985, the dollar touched its strongest levels of the floating rate era against many currencies such as the Deutsche mark (DEM 3.478), having climbed from DEM 3.17 at the start of the year and DEM 1.728 at the end of 1979. But on February 26, 1985, the dollar began a dramatic downward correction that would take it to DEM 2.45 by the end of that year and 1.576 by end-1987.

Equities in the Pacific Rim registered gains today of 1.2% in China and Japan, 0.9% in India, 0.7% in Hong Kong and Australia and 0.6% in New Zealand and Singapore. This favorable trend continued in Europe, where share prices have thus far risen 0.6% in the U.K., 0.5% in France, 0.4% in Germany and Spain and 0.3% in Italy and Switzerland.

Sovereign debt yields are generally steady, having settled back from recent highs.

Comex gold is 0.7% stronger at $1,339.30 per ounce, while WTI crude oil has slipped 0.3% but remains elevated at $63.37 per barrel.

In a week crowded with data releases, Monday’s data and event calendar has been light.

Japan’s index of leading economic indicators slipped to a 2-month low of 107.4 in December from November’s reading of 108.3, but the index of coincident economic indicators (120.2) was at a 326-month high, and the index of lagging economic indicators was the strongest reading in 110 months.

Chinese property prices firmed 0.3% on month despite drops in the biggest cities and rose 5.0% on year in January.

Industrial production in Singapore was stronger than forecast in January even taking account of the lunar new year distortion, rising 6.7% on month and 17.9% on year.

Austria’s manufacturing purchasing managers index, which had set a record high in December of 64.3, fell another 2.1 points in both January and February and now stands at a 9-month low of 59.2. However, input price inflation also deintensified, slipping to a 3-month low.

Czech consumer confidence slipped 0.3 points in February below January’s record high but still shows a 3.3-point net increase from last September’s level. Business climate improved.

The British Bankers Association estimates a surprisingly sharp rebound of mortgage approvals in January to 40,117. December had seen only 36,085 approvals, lowest since April 2013.

Finnish producer price inflation decelerated 0.6 percentage points to 2.4% in January, and Icelandic CPI inflation stayed negative that month at minus 0.7% on a harmonized basis.

Scheduled U.S. data to be released today include new home sales, the Chicago Fed National Activity Index, and the regional Dallas Fed monthly survey of manufacturing. Fed Chairman Jerome Powell’s initial Humphrey Hawkins testimony before the House Financial Services Committee has been moved up to Tuesday from Wednesday. He will reprise that testimony before the Senate Banking Committee on Thursday as was scheduled before.

Copyright 2018, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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