Fears dollar not low enough to shield from mining collapse

Australia: 

On Friday, RBA Board member, Heather Ridout, said in an interview that the currency had not fallen enough to help shield the economy from a mining slowdown. 

Indeed, Ridout said that an Australian dollar around US$0.8000 would be a "fair deal" for the economy. 

Ridout is a non-executive member of the RBA board and does not speak for the central bank on foreign exchange or monetary policy.

Share Markets: 

After a significant slide in equity markets on Friday night, US markets fell further on Monday night. European markets also slipped further on Monday.

Equity markets are concerned about reductions in US monetary stimulus, the pace of US economic growth, corporate earnings growth and the outlook for China and emerging markets.

The FTSE was down 1.70% on Monday following a 1.62% decline on Friday. The Dow fell 1.96% on Friday and was down 0.3% last night.

Bonds: 

Bond markets appeared calm in the face of equity market concerns. Long bond prices were pushed a touch lower lifting 10 year yields up four basis points to 2.76%.

Two year US treasury yields were fairly stable around 0.35%. Australian 10 year bond yields are now off the higher yields seen earlier in the year and now stand at 4.02% while 3 year yields are below 3% at 2.78%.

Foreign Exchange: 

The AUD gained some ground on the USD overnight after weakness on Friday and Monday.

The US dollar index rose marginally after some volatility overnight. Movements in the currencies of emerging nations are continuing to unsettle foreign exchange markets.

Commodities:

Gold and copper prices dipped overnight ahead of the Fed's meeting on Wednesday.

China:

The press reported on Friday that China's banking regulator has ordered its regional offices to increase scrutiny of credit risks in the coal-mining industry. 

There is some speculation that this extra scrutiny is due to the Chinese government's concern about possible defaults. 

The press reports also said that regional CBRC offices were told to also closely monitor risks from trust and wealth management products.

Europe: 

The German IFO business climate index climbed from 109.5 in December to 110.6 in January.

The overall index is at its highest since July 2011, and is back to around the levels just prior to the start of Europe's 2011-2013 recession.

New Zealand: 

Credit card spending fell by 1.2% in December and annual growth slowed to 4.7%.

United States:

Bad weather, slower income growth and higher mortgage rates appear to have slowed the pace of US home sales.

Sales fell 7% in the month of December and sales in November were revised down to a fall of 3.9%. 

Manufacturing activity in the Dallas region exceeded market expectations but remains below levels seen in the third quarter of 2013.



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