Temporary Reciprocal Tariff Pause on Tech Lifts Equities But Dollar Continues to Weaken – Currency Thoughts
Temporary Reciprocal Tariff Pause on Tech Lifts Equities But Dollar Continues to Weaken
April 14, 2025
(196) The dollar fell overnight by 0.9% against sterling, 0.8% versus the Mexican peso and New Zealand’s currency, 0.6% relative to the Aussie dollar, 0.2% vis-a-vis the loonie, and 0.3% against the Japanese yen and euro. Intra-day lows of 1.1424 per euro and JPN 142.2 constituted the dollar’s lowest value in 39 and 6 months, respectively. U.S. Commerce Secretary Lutnick expressed that he has no concern about the dollar’s recent performance. Similar sentiments by high U.S. officials in the face of dollar softening since the dollar first floated in March 1973 have often been perceived in the marketplace as a coded invitation to sell the dollar some more.
One currency that declined against the dollar was the Singapore dollar (-0.4%) after the Monetary Authority of Singapore flattened the slope of the SGD’s target rate following news that GDP in that economy had contracted by 0.8% between 4Q 2024 and last quarter. That bigger-than-expected decline was the first negative movement since a 0.5% drop in 1Q 2022 and lowered year-on-year economic growth to 3.8% from 5.0% in the previous quarter and 5.7% in the third quarter of last year. Explaining this second policy easing since January, officials wrote, “amid the weakening external outlook, Singapore’s output gap will turn negative. Consequently, imported and domestic cost pressures will remain low and MAS Core Inflation is forecast to stay well below 2%. The risks to inflation are tilted towards the downside.”
In yet another change in U.S. tariff policy, a temporary pause was announced in the levies on tech items. In response, share prices rose this Monday in the Pacific Rim by 2.4% in Hong Kong, 1.8% in Australia, Malaysia and India, 1.0% in 1.2% in Japan, and 1.0% in South Korea. Likewise, the German, French, Italian, and Spanish stock markets currently embody advances so far today of at least 2.0%, while the British FTSE both Nasdaq and S&P 500 futures are up by around 1.5%.
The flip-side of this rise in equities has been a broad drop in 10-year sovereign debt yields, including drops of ten basis points in Italy, 8 basis points in the U.K., 7 bps in Spain and France, six basis points in the United States, and four basis points in Germany.
Bitcoin and oil prices are each 1.4% higher, while gold has edged 0.2% lower.
China’s $273 billion trade surplus in the first quarter of 2025 was 51% wider than a year earlier, reflecting a 5.8% increase of exports but a 7.0% drop in imports. For just March, the surplus ballooned to $103 billion from $59 billion a year earlier. The stock of M2 money in China exceeded year-earlier levels by 7.0% in each month of the first quarter, the lowest expansion rate since last October.
Japanese industrial production during February was revised downward slightly to a monthly increase of 2.3% from 2.5% reported initially. Output in January-February was on average 0.7% lower than in the final quarter of 2024 and for the latest month was just 0.1% above the February 2024 level. Capacity utilization in February fell 1.1% on month but rose 1.3% on year in contrast to the average drop in 2024 of 5.2%.
New Zealand’s service sector purchasing managers index edged 0.1 point higher to 49.1 last month. Only January’s reading of 50.4 among all the months in the past twelve exceeded 50.0, the level than demarcates positive from negative growth.
The combined Swiss producer and import price index rose 0.1% on month and fell 0.1% on year in March. Import prices were 0.9% lower than in March 2024, while domestic producer prices were 0.3% higher.
Consumer price inflation in Finland last month matched February’s 50-month low of 0.5%, which is a far cry from the 9.1% peak at the end of 2022.
Bulgarian CPI inflation bottomed out at 1.2% last September. The March reading matched February’s 4.0%, still well down from 18.7% posted in September 2022.
Turkey’s current account deficit of $8.41 billion combined in the first two months of 2025 was 50% wider than a year earlier.
Britain’s Rightmove house price index this month was 1.3% above the April 2024 level. That was tad more than the 5-month low 1.0% increase in March.
Copyright 2025, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: China’s trade surplus, Japanese industrial production, Monetary Authority of Singapore, Swiss PPI
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