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Yen Drops as US Stocks Gain

Fri, Jul 18 2008, 01:24 GMT
by Hans Nilsson

CMS Forex

Yen Drops as US Stocks Gain

• The dollar traded mixed against its rivals Thursday supported by another day of falling energy prices and rising equity prices. The EUR/USD initially rose on weak US housing starts and Philadelphia manufacturing data but pared gains on rising US stocks. The GBP/USD climbed above the psychological important $2.00 mark. The Australian and Canadian dollars fell on lower commodity prices. The yen and Swiss franc declined on increased risk appetite as US equities rose.


• The USD/JPY gained as US stocks rallied for a second day after JPMorgan Chase & Co. reported earnings that beat forecasts. The pair moved back to its recent narrow trading range between 106 and 108; however, having not broken the short-term downtrend. If the stock market rally continues, the USD/JPY will probably break this resistance and continue its ascent.

Financial and Economic News and Comments

US & Canada

• US initial jobless claims increased 18,000 to 366,000 in the week ended July 12, the Labor Department said. Continuing claims dropped 81,000 to 3.122 million in the week ended July 5. Both initial and continuing claims were well below consensus expectations. The 4-week moving average for new jobless claims fell to 376,500 from 381,000. Overall, the numbers indicate the US labor market remains weak.

• US housing starts unexpectedly rose 9.1% m/m to a seasonally adjusted 1.066 million annual rate in June after May’s revised 2.7% m/m fall to 977,000, due to a rise in multiple-units in the Northeast, as a change to New York City building codes effective July 1 caused a deadline rush, but excluding the adjustment, housing starts fell 4% m/m, data from the Commerce Department showed. June single-family housing starts declined 5.3% m/m to 647,000, hitting a 17-year low. Housing starts dropped 26.9% y/y.


• US building permits rose 11.6% m/m to a 1.091 million rate in June with the boost from the rush to secure permits in New York City, following May’s 0.4% m/m decline to 978,000. Excluding the Northeast multifamily figures, permits increased 0.7% m/m in June. Single-family permits fell 3.5% m/m. Permits fell 23.9% y/y.


• June data on housing starts and building permits are weaker than it seems. A future drop is expected.

• The Philadelphia Fed general business activity index improved to -16.3 in July, still indicating manufacturing in the Philadelphia region shrank for an eighth straight month, from -17.1 in June, the Federal Reserve Bank of Philadelphia said. A negative reading signals a decline. The index averaged 5.1 in 2007. The new orders measure was at -12.1 in July from -12.4 in June. The shipments measure fell to -8 from -6.7. The prices paid measure rose to 75.6, the highest level since 1980, from 69.3.

• The International Monetary Fund raised its forecast for 2008 global economic growth. The world economy will expand 4.1% in 2008, faster than the 3.7% forecast in April, the IMF said in its latest World Economic Outlook. The IMF raised growth forecasts for six of the G-7 nations, with only Canada’s economy downgraded. The IMF also lifted the growth outlooks for China, Brazil, Russia and India. Warning of inflation threats, the IMF said “inflation is a rising concern and will constrain the policy response to slower growth.” In many emerging markets, “monetary policy needs to be tightened, combined with greater fiscal restraint and, in some cases, with more flexible exchange-rate management in order to reverse the recent build-up in inflation,” while for industrial nations “the case for policy tightening in these economies is stronger than before the recent oil price increase,” the IMF said.


• Confidence in the global economy deteriorated in July. The Bloomberg professional global confidence index declined to 10.3 in July, the lowest figure since the survey began in November, from 21 in June, as sentiment toward the US, German, Japanese, French and UK economies weakened, Bloomberg reported.

Europe

• Bank of England policy maker Andrew Sentance said he has been “particularly struck” by rising inflation and he considered voting for higher interest rates last month. “I have been particularly struck by the speed with which inflation has moved to somewhere that is significantly above target. There are clear risks to inflation expectations in this environment.” Sentance said.

Asia-Pacific

• Japan’s leading economic indicators index was revised up to 92.9 in May, compared to the preliminary estimate of 92.6, the Cabinet Office said. The coincident index was at 103.3, higher than the initial reading of 103.0. The lagging index stood at 103.4, compared to the preliminary reading of 103.9. The figures indicate some improvement in the current state of the Japanese economy; however, it is too early to call a Japanese economic recovery.

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Published on  Fri, Jul 18 2008, 01:30 GMT

Archive

• Commodity Currencies Plunge on Global Rate Cuts
  Published On Wed, Oct 8 2008, 23:56 GMT
• EUR/USD Breaks Long-Term Uptrend
  Published On Thu, Oct 2 2008, 23:49 GMT
• USD Rises, Awaiting Congress
  Published On Wed, Oct 1 2008, 22:42 GMT
• Greenback Rallies as Dollar Funding Dries Up
  Published On Wed, Oct 1 2008, 00:27 GMT
• USD/JPY Falls as Congress Rejects Financial-Recue Plan
  Published On Tue, Sep 30 2008, 02:26 GMT

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