Many Markets Remain Closed, Korean Won & Turkish Lira Falter
December 26, 2024
Holiday closures continued Thursday in most of Europe, Canada, Australia, New Zealand, Indonesia, South Africa, and other parts of Africa.
The dollar strengthened 0.5% against the South Korean won and 0.3% versus the Turkish lira. South Korean President Han Duck-Soo faces impeachment, and the Central Bank of Turkey’s one-week repo rate was slashed by a greater-than-expected 250 basis points from a peak that was imposed nine months earlier.
The Japanese yen also exhibited softness, dropping 0.4% overnight, after Bank of Japan Governor Ueda made remarks that conspicuously failed to say that a rate hike might be on the table at the next BOJ Board meeting.
The ten-year Treasury yield climbed five basis points overnight, sending U.S. stock futures 0.4% lower. In contrast, stock markets today closed up 1.1% in both Japan and Hong Kong.
The price of Bitcoin fell 3.7% overnight, while that of oil climbed 0.7%.
Price data reported either today or on Christmas revealed
- A three month high of 3.0% in Japanese corporate service price inflation in November.
- Led by a 2.4% upsurge in energy costs, Spanish producer prices leaped 2.7% on month during November, ending a 3-month streak of sub-zero year-on-year readings. The 12-month PPI change swung from -3.9% in October to +0.9%.
- PPI inflation in Bosnia jumped 1.7% on month and 3.9% on year during November.
- In the Philippines, a 0.9% monthly increase in producer prices trimmed their 12-month rate of decline to 0.3% from 1.4% in October.
- Consumer price inflation in Zambia edged 0.2% upward to a new 37-month high of 16.7% this months. That’s virtually halfway between the low of 9.4% in January 2023 and a high of 24.6% in July 2021.
Turkey’s one-week central bank repo rate was reduced to 47.5% from 50.0%. The previous change, a 500-basis point hike in March 2024 had culminated a massive 4100 basis points of tightening begun in June 2023. A released statement from the Central Bank of Turkey‘s monetary policy committee defended the size today’s interest rate cut that exceeded the consensus of analysts that the rate was going to be lowered around 150 basis points. The assertion is made that underlying inflationary pressures seen in month-on-month movements are receding in spite of elevated price expectations. At 47.1% in November, however, CPI inflation is barely below the new interest rate level and down just five basis points over the previous three months versus a retreat of 23.5 percentage points between May and August. A vicious cycle of reinforcing currency depreciation and accelerating domestic inflation had fueled the rise of CPI inflation from 38.2% in mid-2023 to 75.5% eleven months later. Today’s negative reaction of the Turkish lira, which is down over 15% on year, is an ominous sign, even if quite understandable.
Japanese indices of leading and coincident economic indicators reported for November were each revised slightly higher and were at 3- and 5-month respective highs.
The continuing lack of slack in the U.S. labor market was reflected in last week’s lower-than-projected level of new jobless insurance claims (219k).
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Turkey, Japanese corporate service prices, Spanish PPI
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