Dollar Up Against Yen and Canadian Dollar but Flat Relative to Euro and Sterling – Currency Thoughts
Dollar Up Against Yen and Canadian Dollar but Flat Relative to Euro and Sterling
October 11, 2024
Yesterday’s U.S. CPI report delivered mixed news, so investors seek further reassurance from today’s producer price inflation due today and projected to dip modestly on both a month-on-month and year-on-year basis.
Overnight trading saw the dollar advance 0.4% against the yen, 0.3% versus the Canadian dollar, and 0.2% relative to the Australian dollar, but no net movement happened against either the euro or sterling.
There’s been further upside creep in ten-year sovereign debt yields, not only involving the U.S. (+4 basis points) but also Europe where 4-basis point increases also occurred in France and Germany and where gains of six, five and three basis points were seen in Italy, Spain and Great Britain. U.S. stock futures are a touch softer at this hour.
Stock market activity in the Pacific Rim against pointed to wide differences between China (a slide of 2.6%) and Taiwan and Hong Kong where markets closed up 1.1% and 3.0%. Stock markets in Japan and Indonesia closed up 0.5-0.6%, but those in India,k Australia, and South Korea lost modest ground.
Middle East wars and the Trump campaign’s strong endorsement of crypto currencies helped bitcoin‘s price rise 2.4%, and gold has strengthened by 0.7%.
A reduction cycle in the Central Reserve Bank of Peru’s interest rate began in September 2023. Ten cuts have been made so far, each by 25 basis points. As in March, June and July, officials decided to pause the sequence this month, asserting that “future reference rate adjustments will be conditional on new information about inflation and its determinants.” Core Peruvian CPI inflation still exceeds the 1-3% target midpoint, and concern exists that middle eastern tensions could lift imported energy costs.
The Bank of Korea, whose base rate had stayed at a peak 3.50% since a culminating 25-basis point increase in January 2023, finally joined the group of monetary authorities that have begun to lessen policy restrictiveness. Market players had anticipated this decision. Today’s cut reverses the aforementioned final hike in January 2023, and a released statement concludes that more rate reductions will follow but in a cautious manner. South Korean CPI inflation had decelerated from 6.3% in April 2022 to a 43-month low of 1.6% last month. Uncertainties persist regarding world energy prices and the won, while Korea’s housing market has become less tight.
As in Peru, officials at the National Bank of Kazakhstan agreed to pause monetary easing at their latest policy review. The current 14.25% interest rate level is its lowest since October 2022 and 250 basis points below the peak that was maintained from December 2022 until February 2023. CPI inflation in Kazakhstan, although down from a peak of 21.3% early last year to a 39-month low of 8.3% last month, remains higher than the 5% medium-term target. And economic growth remains ample.
German CPI inflation in September was left from preliminary estimates showing no monthly price movement and a 43-month year-on-year low of 1.6% in the total index. Inflation excluding food and energy of 2.7% was its lowest since January 2022. Germany also reported that retail sales in August had risen 1.6% on month and 2.1% on year.
Several British economic indicators were released today. The monthly GDP index increased 0.2% in August and was 1.0% higher than a year earlier. Industrial production advanced 0.5% on month thanks to a 1.1% jump in factory output, but IP was still 1.6% below its year-earlier level. Construction output climbed 0.4%, and its year-on-year change swung to a rise of 0.3% from declines of 1.7% and 1.4% in June and July. Finally, Britain’s merchandise trade deficit narrowed to a 5-month low of GBP 15.1 billion in August, resulting in a goods and services deficit of just GBP 955 million compared to gaps of GBP 4.7 billion in July and GBP 2.2 billion in August 2023.
Swiss consumer sentiment was slightly less negative in September than in August.
In September, consumer price inflation fell a half percentage point to a 39-month low of 4.6% in Romania and dipped to a 3-month low of 4.2% in Serbia, but also rose to a 10-month high of 5.2% in Moldova.
U.S. producer prices were unchanged in September, same as July’s movement and down from a 0.2% monthly uptick in August and street expectations of a 0.1% increase. Year-on-year inflation last month printed overall at 1.8%, lowest in 7 months, 2.8% when excluding food and energy and 3.2% when excluding trade as well as food and energy. Both core measures of producer price inflation were their lowest in three months.
In hyperinflationary Argentina, consumer prices last month rose 3.5%, resulting in a 209% year-on-year pace, which actually was the smallest 12-month advance in ten months and down from 292% last April.
Although BOJ officials have barely begun to retreat from an ultra-loose stance, Japanese year-on-year M2 money growth fell to 1.3% last quarter from 1.8% in the second quarter and 2.5% in both 1Q and all of 2023.
New Zealand’s manufacturing purchasing managers index rose 0.8 points to 46.9, it’s least contractionary signal in four months.
Factory output in South Africa dropped 0.6% on month and 1.2% on year in August.
Malaysian industrial production and retail sales were 4.1% and 5.9% higher than a year earlier in August.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Bank of Korea, British industrial production and trade deficit, Central Reserve Bank of Peru, National Bank of Kazakhstan, U.S. producer prices
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