US dollar Japanese yen and Swiss franc decline

03-16-2009 15:42

This Monday the Japanese yen, the Swiss franc and the US dollar proved to be low-yielding and showed the poorest results among the major currencies while the higher-yielding currencies and stocks were boosted by an increase in risk appetite. The G-20 communiqué improved confidence as the member countries are making progress in realizing a plan which should boost the financial system and recover global growth. Indeed, US Treasury Secretary Geithner promised to publish more detailed data of the plan that should support banks in solving the ‘toxic assets problem’, which adds more uncertainty to the financial markets. According to FED Chairman Bernanke, the US recession may end this year and the depreciation risk has already been eliminated.

US industrial production fell – Net long-term flows dropped

The US industrial production dropped by 1.4 percent in February, for the fourth consecutive month and proved that the US economic data generally are disappointing. However, TIC data (Treasury International Capital) showed surprisingly that net sellers of US assets were foreign investors, while in January net long-term flows dropped by $42.986 billion; the biggest decline since August 2007.

Euro rises while unemployment increases – CPI goes up

For the first time in 6 months the Consumer Price Index (CPI) increased while the euro advanced as unemployment rises. Despite the gloomy Euro-zone data, price actions cause shifts in risk appetite. In the last quarter of 2008 Euro-zone’s unemployment accelerated, which resulted in a quarterly drop of 0.3%. The third quarter of 2008 showed a 0.1% fall, while the annual rate fell from 0.6% to 0.0%. For the first time since September, Euro-zone’s CPI increased by 0.4%, while the annual rate rose from 1.1% to 1.2%. The core measure of CPI consists of tobacco, food, energy and alcohol prices and this annualized rate went up from 1.6% to 1.7%. However, these inflation measures are significantly below the European Central Bank’s target of 2%. The European Central Bank has stated that short-term fluctuations will not influence the intentions to lower rate once more during the next meeting on April 2.