Will dollar find support?

* The dollar was mixed on Friday, sharply lower versus the yen but modestly higher against the commodity currencies. US consumer confidence rose more than expected, boosted by the recent rally on Wall Street. Wholesale inventories fell for a record eleventh straight month while wholesale sales gained, indicating a US economic recovery in on track. The S&P 500 fell 1.41 points to 1,042.73, the first decline in six days. The USD/JPY plunged following the penetration of the 91.50 support. The euro was flat. Sterling rose modestly, supported by higher UK producer-price inflation. The Australian and Canadian dollars declined as commodity prices fell despite China’s better-than-expected industrial production.

* The dollar index fell for a sixth consecutive day, the longest loosing streak since the beginning of the stock market rally in March. Despite weakness in US stock market prices, the dollar index declined 0.13 points to 76.69 today, approaching the 76-area support. Stocks are overbought and usually weak in September/October, and the dollar usually appreciates during the same time. We believe there is a good chance that the dollar may find support despite strong downward momentum and solidly negative sentiment.

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Financial and Economic News and Comments

US & Canada

* US import prices rose a more-than-expected 2.0% m/m in August, the fifth rise in six months, on higher energy prices, after a 0.7% m/m decline in July, data from the Labor Department showed. Excluding petroleum, import prices advanced 0.4% m/m. Export prices climbed 0.7% m/m in August, driven by higher nonagricultural export prices, after a 0.3 m/m decline in July. Import prices dropped 15.0% y/y; export prices decreased 6.1% y/y.

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* The Reuters/University of Michigan US consumer sentiment preliminary index for September rose more than expected to 70.2 from 65.7 in August, according to a Reuters and University of Michigan report. The current conditions index climbed to 71.8 in September from 66.6 in August, and the expectations index increased to 69.2 from 65.0.

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* US wholesale inventories fell for a record eleventh consecutive month in July, falling a more-than-expected 1.4% m/m to a seasonally adjusted $387.2 billion, after a revised 2.1% m/m decline in June, figures from the Commerce Department showed, registering the longest stretch of declines since records began in 1987. Wholesale sales increased 0.5% m/m to 314.5 billion in July after an upwardly revised 0.3% m/m advance in June, another indication that the US economy is recovering. The July inventory-to-sales ratio declined to 1.23 from June’s downwardly revised 1.25, higher than July 2008’s 1.13. Inventories fell 12.8% y/y in July; sales dropped 19.8% y/y.

* The US budget deficit narrowed to $111.4 billion in August from $111.9 billion a year earlier, the Treasury said. Spending fell for the first time since February, falling 4.5% to $256.9 billion in August. Revenue declined 7.3% to $145.5 billion.

* Canada’s new housing prices unexpectedly rose 0.3% m/m in July, the first gain since September 2008, after a 0.2% m/m decline in June, according to data from Statistics Canada.

Europe

* UK PPI output increased 0.2% m/m in August, a sixth monthly gain, driven by increases in prices of other manufactured, petroleum and chemical products, after increasing at the same pace in July, figures from the Office for National Statistics showed. PPI output declined 0.4% y/y. Core PPI output was up 0.2% m/m in August after a 0.4% m/m increase in July. Core PPI output rose 0.7% y/y. PPI input advanced 2.2% m/m in August, the most since June 2008, reflecting an increase in the price of crude oil. PPI input declined 7.5% y/y, following July’s 12.2% y/y drop.

* Germany’s wholesale price index increased 0.7% m/m in August after a 0.5% m/m decline in July, the Federal Statistical Office reported. The index fell 8.3% y/y, following July’s 10.6% y/y decrease.

Asia-Pacific

* Japan’s GDP grew 0.6% q/q in Q2 2009, slower than a preliminarily reported 0.9% q/q, revised Q2 GDP data from the Cabinet Office showed, after a 3.1% q/q decline in Q1. The GDP expanded at an annualized 2.3% rate, less than a previously reported 3.7%, following Q1’s -11.7% pace. The economy shrank 7.2% y/y in Q2, revised from a previously reported 6.4% y/y decline, after contracting 8.7% y/y in Q1. The figures indicate Japan’s economic recovery from its recession was weaker than previously thought, adding pressure on the incoming Yukio Hatoyama government to sustain economic growth.

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* The Japanese consumer confidence index excluding one-person households rose to 40.1 in August from 39.4 in July, indicating Japan’s household sentiment climbed for an eighth consecutive month, according to data from the Cabinet Office. The index has improved every month since December’s record-low 26.2, adding to Japanese economic recovery signs; however, a number below 50 means pessimists outnumber optimists. Including one-person households, the consumer confidence index increased to 40.4 from July’s 39.7.

* China’s retail sales climbed a slightly more-than-expected 15.4% y/y in August, the largest gain for the year after accounting for seasonal distortions caused by the lunar new year holiday, data from the Statistics Bureau showed, while industrial production climbed a more-than-anticipated 12.3% y/y in August, the most since August 2008. Local-currency new loans increased to 410.4 billion yuan ($60 billion) in August from 355.9 billion yuan in July, the People’s Bank of China said. M2, the broadest measure of money supply, rose a record 28.53% y/y in August. CPI fell 1.2% y/y in August, a seventh consecutive fall, giving the PBC more room to maintain interest rates at a 4-year low. PPI fell 7.9% y/y, following July’s record 8.2% y/y drop. Overall, the figures signal a strengthening economic recovery in China.

* China’s trade surplus rose more than estimated to $15.70 billion in August from $10.63 billion in July, according to trade data from the Customs Bureau. Exports dropped a more-than-anticipated 23.4% y/y in August, the largest fall in three months, after a 23.0% y/y decline in July, and imports fell a more-thanexpected 17.0% y/y after July’s 15.0% y/y decrease.

Источник: Hans Nilsson

11.09.2009