Declines in Kiwi, Ruble and Turkish Lira

August 9, 2018

The dollar advanced overnight by 1.6% against the New Zealand dollar, 0.9% versus the Russian ruble, and some 2.5% vis-a-vis the Turkish lira. Not only did the latest review of New Zealand monetary policy end with leaving the Official Cash Rate at 1.75%, half its level prior to the June 2015 first of 7 reductions, but a released statement from RBNZ Governor Orr projected that the OCR is likely to remain at that record low through 2019 and into 2020. “We will keep the OCR at an expansionary level for a considerable period to contribute to maximizing sustainable employment, and maintaining low and stable inflation.”

Selling pressure against the ruble and lira has been related to geopolitically-inspired U.S. trade sanctions. President Trump has pursued a more muscular trade policy in 2018 perhaps in part to distract attention from the ongoing Mueller investigation into whether his presidential campaign conspired with Russian efforts to influence the 2016 U.S. election. For people comparing this scandal to one that followed the break-in to Democratic headquarters in the Watergate Hotel in June 1972, it should be noted that today is August 9, the equivalent date on which former President Nixon, facing an impeachment trial that he was bound to lose, resigned from office. It would seem, by comparison, that the Mueller investigation, which remains shrouded in secrecy, is proceeding at a much too methodical pace to command public attention and in danger of stalling out.

The dollar hardly changed overnight on balance against the euro, sterling, Swiss franc, loonie, yuan, or Australian dollar.

Share prices in Asia rose 1.8% in China, 1.3% in Hong Kong, 0.3% in India but fell 0.2% in Japan, 0.5% in Indonesia and 0.4% in Taiwan. New Zealand and Australian stock markets climbed 0.9% and 0.5%, but equities in Europe now show losses of 0.7% in the U.K., 0.6% in Italy, 0.4% in France and Switzerland, and 0.2% in Spain and Germany.

West Texas Intermediate crude oil is unchanged and hovering just south of $67.00 per barrel. While some metals like copper have spike higher, gold is pretty steady at $1,222.40 per ounce. Ten-year Treasury, German bund, British gilt and Japanese JGB yields haven’t moved much, either.

Two other central banks besides the Reserve Bank of New Zealand announced the results of monetary policy reviews:

  • At the National Bank of Serbia, the Executive Board kept its key policy rate unchanged at 3.0%, finding the dual 25-basis point reductions made in March and April to be ample to lift inflation back into target and to promote continuing growth, which in the first half of 2018 was 4.5%.
  • Officials at Bangko Sentral ng Pilipinas raised the Filipino overnight reverse repo rate, the overnight deposit rate and the overnight lending rate by 50 basis points each to 4.0%, 3.5%, and 4.5%. This was the largest incremental hike since 2008 and came amid accelerating inflation, broader inflationary pressure, and strong demand conditions.

China consumer price inflation rose to 2.1% in July, a four-month high, in July. That’s up from 1.5% six months earlier and 1.9% in June. PPI inflation ticked down 0.1 percentage point to a 2-month low of 4.6%.

Singapore’s market was shut today for the National Day holiday.

Japanese core domestic machinery orders fell 8.8% in June, four times greater than forecast and on the heels of a 3.7% drop in May. However, that didn’t prevent a 2.2% increase in the second quarter versus the average 1Q level. Government and export orders sank 16.7% and 12.0% on month in June and were 17.1% and 3.2% below their year-earlier level.

On-year growth in Japanese M3 money, M2 money, and broad liquidity of 2.6%, 3.0% and 2.3% in July was slightly lower than in June.

Finally, Japanese machine tool orders in July were 13% higher than a year earlier in July. That small acceleration from from an 11.4% increase in June broke a streak of decelerations from an on-year advance of 48.8% in January.

Swiss unemployment remained at 2.4% for a third straight month in July. That’s the lowest unadjusted level since mid-2008 and down from 3.0% in July 2017.

Greek unemployment fell a half percentage point to 19.5% in May, lowest since September 2011, while Icelandic unemployment picked up to a 2-month high of 3.4% in June.

Irish CPI inflation doubled to a 15-month high of 0.8% in July, but Czech CPI inflation dipped 0.3 percentage points to 2.3% last month.

U.S. producer price inflation stagnated on month in July, the first non-positive month-on-month change since last December. Energy fell 0.5%, and food costs were 0.1% lower than in June. The non-energy and food core PPI index increased 0.3%, same as in May and June. Year-on-year PPI inflation slipped to a 2-month low of 3.3%.

New U.S. jobless insurance claims last week settled back to 213K, yielding a 4-week average of just 214-1/4K, down from 223K in the previous four weeks through July 7.

Canadian housing starts fell sharply from a 7-month high of 246.2K in May to 206K in June, which was the smallest total in at least a year.

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

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