Narrowly Mixed Dollar Conceals Resilience

The US dollar little changed against most of the major currencies. The dollar finished yesterday’s North American session on a soft note, but follow through selling has been limited. After rallying to near 10-month high above JPY116 yesterday, the greenback finished on session lows near JPY115.00.Initial potential seemed to extend toward JPY114.30, but dollar buyers reemerged near JPY114.75, and it rose back the middle of the two-day range (~JPY115.40 area).  

The Nikkei gapped higher yesterday, and despite the lower opening, the gap was not entered, and Japanese stocks recovered. The Nikkei closed 0.5% higher, extended its advance to the sixth consecutive session. The Topix gained a little more, and also extended its streak to six sessions. 

China eclipsed Japan in terms of news. The data suggest the economy is finding better traction.November industrial output rose 6.2%. The median expected no change to the 6.1% pace seen in both September and October.It matches the 11-month average. Retail sales rose 10.8%, the most since last December. The Bloomberg consensus was for a 10.2% increase. Fixed asset investment was steady at 8.3%, as expected.  

Chinese shares recovered from early losses. The Shanghai Composite fell 1.1% before recovering to eke out less than a 0.1% gain. Telecom, consumer staples, and energy led the way. Financials were the weakest sector, losing 1.2%.Some reports suggested that the PBOc, operating through a couple of major banks, may have intervened to sell US dollars around CNY6.9, but of course, confirmation remains elusive.    

European economic data featured Italian industrial output, Germany CPI and ZEW, and UK prices. Like France and Germany, Italy’s October industrial production disappointed.The median forecast was for a 0.2% increase after a 0.8% decline in September. Instead, output was flat, with the year-over-year pace slipping to 1.3% from a revised 1.9% (from 1.8%).