Dollar and Yen Fall on More Recovery Signs

* The dollar was higher against the yen but lower against other key currencies on Friday after more signs of a US economic recovery. The ISM US manufacturing new orders rose to 47.2 in April from December’s 23.1 low, signaling the recovery is in sight. US consumer confidence climbed to the highest level since September 2008. For the week, the greenback fell against its rivals except the yen as risk sentiment improved on more economic recovery signs. The Dow rose 44 points to 8,212. The US stress-test results for the US 19 largest banks will be delayed until May 7. The yen fell ahead of next week’s Golden Week holidays as Japanese unemployment rose to the highest level since August 2004. The euro rose modestly in thin trading; there were no eurozone economic releases due to the May Day holiday in most of Europe. Sterling rose on the betterthan- expected UK manufacturing PMI. Despite Australia’s falling PMI, the Australia dollar advanced on a report that China’s manufacturing PMI rose, indicating stronger Chinese growth and Australian exports.

* The USD/CAD fell for a fourth day and declined to the lowest level since January 9. Signs of improving economic growth and higher commodity prices are supporting the commodity-dependent Canadian currency. The pair is testing support in the 1.18 area. If this is broken, the USD/CAD will likely fall to the 1.15 support and possibly as low as the 1.07 area. The pair’s somewhat overbought condition could support its near-term outlook.



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Financial and Economic News and Comments

US & Canada

* The ISM US manufacturing index for April rose to 40.1, the highest level since September 2008, from 36.3 in March, exceeding consensus expectations for a fourth straight month, data from the Institute for Supply Management showed. The April gain, led by improving production and new orders, indicates the contraction in the US manufacturing sector is easing and the overall economy is on the brink of an economic recovery. The April ISM index components all improved. As shown in the chart below, the new orders index, a leading measure, surged to a 7-month high of 47.2 in April from 41.2 in March, a significant sign for the recovery. The production index rose to 40.4 from 36.4, the employment index rose to 34.4 from 28.1, and the supplier deliveries index rose to 44.9 from 43.6. The prices paid index increased to 32.0 from 31.0, signaling the threat of deflation is diminishing.

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* The Reuters/University of Michigan final US consumer sentiment index for April jumped to 65.1, indicating US consumer confidence climbed to its highest level since September 2008, following 57.3 in March. The current conditions index rose to 68.3 in April from 63.3 in March and the consumer expectations index improved to 63.1 from 53.5.

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* US factory orders declined a more-than-expected 0.9% in March after a downwardly revised 0.7% increase in February, data from the Commerce Department showed. Excluding transportation orders, factory orders were down 0.9% after February’s 0.5% gain.

Europe

* The UK manufacturing PMI rose more than anticipated to 42.9 in April from an upwardly revised 39.5 in March, indicating UK manufacturing contracted at the slowest rate in eight months and adding to recovery optimism, according to data from the Chartered Institute of Purchasing and Supply and Markit Economics.

* UK mortgage approvals in March increased less than expected to 39,230, still the highest in 10 months, from 37,716 in February, data from the Bank of England showed.

* UK consumer credit rose £0.1 billion in March, the Bank of England said. Overall net lending to consumers rose £0.9 billion, the least since records started in 1993.

Asia-Pacific

* Japan’s consumer prices excluding fresh food fell 0.1% y/y in March, the first fall since September 2007, after being unchanged y/y in February, the Statistics Bureau said. Tokyo’s consumer prices excluding fresh food was unchanged y/y in April after a 0.4% y/y increase in March. There is little risk of a deflationary spiral, Bank of Japan Governor Masaaki Shirakawa said.

* Japan’s March unemployment rate rose to 4.8%, the highest in more than four years, from 4.4% in February, the Statistics Bureau said. The job-to-applicant ratio declined to 0.52, the lowest in seven years, from February’s 0.59. Wages fell 3.7% y/y in March, the fastest decline in more than six years.

* Japanese household spending was down 0.4% y/y in March, its 13th monthly fall, after a 3.5% y/y decline in February, according to the Statistics Bureau.

* China’s manufacturing PMI increased to a seasonally adjusted 53.5 in April from 52.4 in March, indicating a manufacturing expansion for a second month and signaling a Chinese economic recovery, according to the Federation of Logistics and Purchasing.

FX Strategy Update



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Источник: Hans Nilsson

01.05.2009