Dollar Strengthens to 2024 High
April 12, 2024
Fear that Iran is going to attack Israel is augmenting economic factors strengthening the dollar, which climbed 0.7% on a weighted basis to its strongest point since November.
Today’s release of U.S. import price data also buoyed the U.S. currency. Import price gains in March of 0.4% both on month and year-on-year exceeded expectations. Import prices last May were 6.1% below year-earlier levels, by contrast. Fuel costs, which leaped 4.7% compared to February were the driving force behind higher import price inflation in March. Non-fuel import prices edged only 0.1% higher on month.
Expectations that the European Central Bank will cut interest rates sooner than the Fed are lifting the dollar, too. The preliminary German March CPI figures, showing a 34-month low of 2.2% inflation rate were not revised. Similarly, an estimate of 3.2% Spanish CPI inflation was also reconfirmed.
A war between Israel and Iran would imperil the supply-demand balance for oil, which today has risen 2.5% in price. Gold is also thriving on safe-haven inflows and climbed 1.6% further today and is now above $2,400 per ounce.
More disappointing Chinese data showing soft money and credit demand were reported this Friday. New yuan loans of CNY 3.09 trillion in March were lower than forecast and below the CNY 3.89 trillion in March 2023. Likewise, the stock of M2 money in China rose 8.3% year-on-year, down from 8.7% in January-February.
The monthly slide of Japanese industrial production in February has been revised upward to 0.6% from 0.1% estimated initially, resulting in the biggest on-year decline (5.9%) in 5 months. Capacity usage fell 0.5% on month and 6.2% on year during the latest month.
On-year growth in Indian industrial production of 5.7% during February was the most in 4 months. Separately, Indian consumer price inflation slowed below the 5% threshold in March to 4.85%. That’s down from a cyclical peak in April 2022 of 7.79%.
Today’s menu of released British data included
- A 1.1% rebound of industrial production in February (most in 8 months and led by a 1.2% rise in manufacturing.
- A 1.9% monthly drop in construction output.
- Softer GDP growth of just 0.1% on month and -0.2% on year in February.
- A merchandise trade deficit of GBP 14.21 billion in February. The GBP 28.3 billion year-to-date shortfall was 13% narrower than in January-February of 2023. The goods and services trade gap widened to GBP 2.291 billion in February, reflecting disappointing export demand.
Ten-year sovereign debt yields are significantly lower today in the U.S. and U.K. (down 8 bps) and Germany and France (-13 bps).
The Central Reserve Bank of Peru cut its main interest rate by 25 basis points to 6.0%. That’s the third such cut this year and follows a drop of 100 bps in the final third of 2023. Peruvian CPI inflation of 3.05% last month rested on the top of the central bank’s target corridor of 1-3%. “Future reference rate adjustments will be conditional on new information about inflation and its determinants.”
Central banks in South Korea and Singapore left their monetary stances unchanged. South Korea‘s policy interest rate has been at 3.5% since a 25-basis point hike this past January. Such was 0.5% from May 2020 to August 2021. Singaporean monetary policy is subordinated to its currency management. The width, midpoint, and slope of the allowed S$ trading corridor were each left unchanged. The last change, and upward adjustment of the midpoint was done in October 2022.
Just in: U.S. consumer sentiment, measured by the U. Michigan index, suffered a significant setback this month, dropping to 77.9 from a 32-month high of 79.4 in March.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Korea, Central Reserve Bank of Peru, Monetary Authority of Singapore, U.S. import prices
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