Dollar Close to a Two-Month Low
April 19, 2021
The dollar kicked off this third week of April with a 0.5% decline on a weighted basis overnight. The U.S. currency lost 0.7% against the Swiss franc, 0.6% versus the yen, Australian and New Zealand dollars, 0.5% relative to sterling, and 0.4% against the euro and Mexican peso.
To some extent, the dollar’s slippage may reflect investor reaction to the U.S. Treasury Department’s semi-annual review of Macroeconomic and Foreign Exchange Policies of Major Trading Partners. Released just before the weekend, that report labeled no country as a “currency manipulator,” thus removing both Switzerland and Vietnam from that technical list in the final review under the Trump Administration. However, the report noted that
Over the four quarters through December 2020, five major U.S. trading partners — Vietnam, Switzerland, Taiwan, India, and Singapore — intervened in the foreign exchange market in a sustained, asymmetric manner with the effect of weakening their currencies. Three of these economies — Vietnam, Switzerland, and Taiwan — exceeded the two other thresholds established by Treasury to identify potentially unfair currency practices or excessive external imbalances.
The Treasury’s Report also flagged an upward trend in the U.S. current account deficit, which
expanded to 3.5% of GDP in the fourth quarter, 1.6 percentage points larger than at the end of 2019 and the largest U.S. deficit as a share of GDP since the final quarter of 2008. Treasury remains concerned by how persistent current account imbalances will evolve as the effects of the pandemic subside. With heightened risks of economic scarring, it is important that governments bolster domestic-led rather than externally supported growth.
Today’s other notable financial market development has been a sizable decline in the price of a bitcoin to $57,128 from last week’s record high of slightly mre than $64k.
In stock market action overnight, share prices rose 1.5% in China but fell 1.8% in India. Markets in Japan, South Korea and Australia closed unchanged, and net movement has been minimal so far in the U.K., German and Italian exchanges. U.S. futures are down modestly.
The ten-year German bund yield climbed two basis points, while its Japanese counterpart slid a basis point. The 10-year U.S. Treasury yield and British gilt yield are unchanged.
Among commodity prices, WTI oil has settled back 0.3%, and gold is hovering near a 2-month high.
Disparate Covid trends in the United States persist, with vaccinations proceeding at a rapid pace, deaths limited to just over 1000 on Saturday-Sunday, but new cases averaging about 60k daily over the past 72 hours. India continues to experience a particularly severe Covid wave.
Not a whole lot of data have been released today, as is often the case on Mondays.
The monthly decline of Japanese industrial production in February was revised downward to 1.3% from 2.1% reported initially. Meanwhile, Japan recorded a considerably larger JPY 664 billion customs trade surplus last month than had been forecast. That compared to a surplus of just JPY 7 billion in the year-earlier month, as a 16.1% on-year jump in exports dwarfed a 5.7% rise in imports. The seasonally adjusted surplus swung from a deficit of JPY 11 billion in February to a surplus of JPY 298 billion in March as exports rebounded 4.3% while imports slid 0.7% under then prior month’s level.
Euroland’s current account surplus printed at a seasonally adjusted EUR 25.9 billion in February versus EUR 34.7 billion in both December and January. But as percent of GDP, the unadjusted surplus in the 12 months through February equaled 2.3%, 0.2 percentage points higher than in the previous 12-month period.
Construction output in the euro area sank 2.1% in February, the second decline in the past three report months and resulting in a larger 5.8% drop compared to the year-earlier level.
Britain’s Rightmove house price index rose 2.1% on month and 5.1% on year in April.
Australian new home sales leaped 90.3% in March to its largest level in about 17 years.
Taiwanese consumer sentiment improved 2.5% to a one-year high in March.
Portuguese producer price inflation of 0.7% in March broke a 20-month-long streak of subzero results and was the highest pace in 22 months.
The service sector purchasing managers index in New Zealand moved above the 50 threshold between improvement and deterioration to an 8-month high of 52.4 from 49.7 in February and a recent low of 46.9 in November.
Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Euroland current account, Japanese trade balance, Treasury Report on foreign exchange