Dollar Opens Week of Thanksgiving with a Dip

November 20, 2023

The dollar fell overnight by 1.0% against the yen, 0.7% versus the kiwi, 0.6% vis-a-vis the Australian dollar and Chinese yuan, 0.3% against the Mexican peso, 0.2% versus the Swiss franc and 0.1% relative the the euro and sterling. Data and event highlights this week will include Federal Reserve FOMC minutes, the British Autumn Statement that lays out the government’s spending plans, preliminary November purchasingĀ  manager survey findings, Canadian and Japanese consumer prices, and German quarterly GDP and monthly business climate index. On Thursday Thanksgiving will be observed in America, and Japanese markets will be closed to for Labor Thanksgiving.

MAGA politics won the day in Argentina’s run-off presidential election. Far-right populist Javier Milei captured a bigger majority than opinion polls had suggested. He and Trump mutually admire one another, espouse retribution against their political opponents, oppose immigration, promise to reduce government social spending sharply, favor gun deregulation, oppose abortion, and wish to enhance and solidify executive government power at the expense of democratic traditions. Each gained extensive public recognition previously as television personalities. Milei’s uniqueness is a controversial proposal to dollarize Argentina, allowing the U.S. currency to become Argentina’s money as well and to delegate domestic monetary policy to the Federal Reserve. Argentina’s uniqueness is a long tradition, unlike the United States, of populist and autocratic government leadership as well as well as chronic inflation. Consumer price inflation has exceeded 10% without interruption for over a decade, accelerating from 10.5% at end-2013 to 50.7% by February 2019 and from 35.8% in November 2020 to 94.8% by December 2022, 138.3% in September 2023 and 142.7% last month.

Investors cannot help but wonder if the weekend’s election in Argentina will be a harbinger of America’s 2024 election. Ironically, today is Joe Biden’s 81st birthday. That age has been viewed by voters as a liability, but like former Supreme Court Justice Ruth Bader Ginsburg, the 46th U.S. president isn’t heeding advice to leave the political limelight for a younger replacement.

Economic news today has been scant, which is typical of many Mondays.

The People’s Bank of China’s key one-year and five-year loan prime rates were left unchanged as expected at 3.45% and 4.20%. The one-year rate was lowered twice this year (June and August) by a total of only 20 basis points, while that 5-year rate got cut only in June by 10 bps. Although China’s property market remains highly vulnerable and real economic data have as late been only mixed, central bank officials fear excessive monetary stimulus might expose the yuan to unwanted depreciation accompanied by greater capital outflows.

GDP in Thailand grew last quarter by a slower-than-forecast 0.8%, resulting in a lower 1.5% year-on-year growth rate after 1.8% in the second quarter, 2.6% in 1Q and a 4.6% on-year rise in the third quarter of 2023.

German producer prices dipped 0.1% in October. That was the fifth monthly slide in six months and associated with an 11.0% year-on-year plunge. The 27.9% drop in the energy component was less steep than in August or September, but collective positive PPI inflation among all other components of the PPI index slowed to a mere 0.2% from 0.8% in theĀ  prior month and 2.0% recorded in the year to July.

Negative producer price inflation rates were also reported in Georgia (-0.8%) and Estonia (-3.0%). Those economies have respectively experienced PPI deflation for the past nine and five months.

Construction output in the euro area rose 0.4% in September but was 0.3% below the year-earlier level. For the third quarter as a whole, construction fell 0.3% versus 2Q and rose just 0.5% on year. Signals from the European Central Bank that monetary policy will need to remain tighter for longer if price stability is to be restored offer little respite from construction’s difficulties.

In U.S. corporate news, Microsoft has opportunistically hired the recently fired CEO of Open AI and a fellow co-founder of the artificial intelligence pioneering company. In pre-market action, Microsoft’s share price is quoted 1.7% weaker.

Stock market action in the Pacific Rim this Monday saw Hong Kong’s Hang Seng index rise 1.9% but Japan’s Nikkei fell 0.6%. European share prices are narrowly mixed, and U.S. stock futures are marginally in the red.

Despite the aforementioned dip of the dollar, prices for bitcoin (-0.3%) and gold (-0.4%) are a touch lower as well. West Texas Intermediate oil has rebounded 1.4%, however, and ten-year sovereign debt yields are up by 3 basis points in Britain and the United States and two bps in Germany, France and Italy. The Japanese JGB yield is a basis point softer and, at 0.74%, 23 basis points below the year-to-date high of 0.97% touched on October 31.

Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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