Solid Year for the Dollar But Gains Were Trimmed Substantially in Final Quarter
December 29, 2022
At peak in late September, the weighted DXY dollar index had advanced about 19% in 2022, but the full year appreciation has been pared to less than 9%, including another 0.2% overnight. Compared to yesterday’s close, the dollar has fallen 0.6% against the yen, 0.5% versus the Swiss franc, 0.3% relative to the euro and Aussie dollar, and 0.2% vis-a-vis the Canadian dollar and Chinese yuan.
Equities have experienced only short-lived respites from a year of relentless selling pressure related to elevated inflation, relentless monetary policy tightening, and fears that such will lead to a recession next year. Share prices in the Pacific Rim dropped today by 1.9% in South Korea, 0.9% in Australian and Japan, 0.8% in Hong Kong, 0.6% in Taiwan, and 0.4% in China. European markets are listless, and while U.S. stock futures are somewhat higher, the same was true in pre-dawn trading yesterday prior to a big sell-off in trading hours. Attention today is focused on two companies in particular — Southwest Airlines and Tesla — which respectively dropped 19% and 39% in December so far.
Ten-year sovereign debt yields rose today by four basis points in the U.K. and a basis point in Germany but dipped a basis point in Japan and the United States. The price of West Texas Intermediate oil has sunk 1.3% today, while changes in those of gold and Bitcoin have been inconsequential.
In many countries inflation at the producer price level has been easing. Twenty-one month lows were reported today of 3.2% in Malaysia (down from from 12.6% a year earlier) and Singapore of 6.1% (down from a record high of 31.5% last May). Filipino PPI inflation of 6.4% in November represented a 7-month low. Consumer price inflation in Vietnam, in contrast, climbed to a 33-month high this month of 4.6%.
Today also brought news of diminishing demand and output growth around the world.
A 0.4% rise in South Korean industrial production last month broke a four-month streak of declines but was associated with the largest 12-month rate of decline (3.7%) in 27 months. South Korean retail sales fell 1.8% on month and 2.2% on year in November.
Thailand’s $1.342 billion trade deficit in November reversed a $1.32 billion surplus a year earlier and raised the year-to-date deficit to $16.9 billion versus a surplus of $3.9 billion in the first 11 months of 2021. In Hong Kong during November, exports and imports recorded their largest year-on-year implosions since 1954 and early 2009, respectively. India’s current account deficit swelled to a record $36.4 billion last quarter, twice the size of the second-quarter deficit and equal to 4.4% of Indian GDP.
In spite of a 3.8% jump in Spanish retail sales last month, such posted the largest 12-month rate of decline (0.6%) since March.
Russian industrial production was 1.8% weaker in November than a year earlier, their eighth straight month of year-on-year decline. Russian GDP was 4.0% lower that month than a year earlier, and retail sales plunged 7.9% over the same 12-month period. The Russian manufacturing purchasing managers index ticked 0.2 points lower to 53.0 this month.
On-year M3 money growth in the euro area slowed to 4.8% in November from 5.1% in October and 6.3% in September. Bank lending to households and non-financial firms, as well as domestic credit expansion, are also decelerating.
The Dallas Fed manufacturing index printed at a 2-month low of -18.8 and has been in sub-zero territory since May.
A 37.8% drop in U.S. pending home sales last month was the largest 12-month slide in a year.
Another historically small number of new U.S. jobless insurance claims last week of 225k is regrettable. A return to sustainable price stability amid softer demand and production will not be sufficient unless also accompanied by broad signs of slack returning to the labor market.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: India current account, South Korean industrial production and retail sales, Tesla and Southwest Airlines