Daily Archives: August 12, 2010

Views on eurozone inflation are converging. So too, views on GDP growth and unemployment. Headline rates were largely static from today’s Q3 Survey of Professional Forecasters; GDP growth and unemployment both ticked down compared with the Q2 survey, but it was marginal.

But as these charts show, views among the 55 or so forecasters are converging, even if the one-decimal-place standard deviations don’t show it.

More charts below the jump. 

Die Zeit apparently reports Germany’s debt-to-GDP ratio could rise to 90 per cent when the government includes bad bank debt in its calculations, as recommended by Eurostat in July.

WestLB assets are apparently already included in the calculations, but the additional of Hypo Real Estate might indeed increase the ratio, the ministry apparently confirmed

It’s as if the depegging never happened: the latest exchange rate set by China places the value of the yuan squarely within its original trading bounds.

On June 18, when the yuan was still pegged, it was trading at 6.8275 per dollar, with a 0.5 per cent tolerance each side (blue lines). Since then, the daily midpoint, published by foreign exchange regulator Safe, has generally valued the currency very slightly stronger than its original band. Not today. 

An unscheduled statement from the Bank of Japan governor, though short, speaks volumes about worries over the strength of the yen. The currency broke a 15-year high of 85 to the dollar yesterday, which will add to recovery fears for the export-dependent economy.

Whenever the yen is strong, theories of currency intervention abound. It is thought likely the central bank would introduce further easing before the ministry of finance intervened to sell yen. The statement certainly tells us the BoJ is on the case: 

Growing concern amongst Asian central bank governors about capital inflows, which have seen a number of countries embrace once-dreaded capital controls, appears to be spreading to Latin America. Chile’s unflappable central bank governor, José De Gregorio, today expressed his concern about the growing number of foreign investors piling money into emerging markets. He says it is time to keep an eye on capital inflows.

According to El Mercurio newspaper, this is what he had to say at a seminar:

Capital flows are worrying me . . . This is not yet a problem in the Chilean economy, but we have to remain relatively alert and thinking about what implications this will have for monetary policy.

High copper prices, global stock market gains and the expectation that Chile’s central bank will continue to raise rates regularly have helped push the peso currency higher – it recently touched a five-month high. It has eased a little today against the dollar, trading around 513 to the greenback.

If De Gregorio is concerned, Bertrand Delgado, a senior analyst at Roubini Global Economics, says he has a few options to manage dollar liquidity.