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Trade and monetary policies

Dollar wanes

You can tell a currency is having a bad day when it loses ground to both the Turkish lira and the Mexican peso. The US dollar found itself in that position yesterday.  It lost 1% to both of them and, for good measure, to the South African rand as well.

Although it was far from a disastrous day for the Greenback - it lost only a third of a cent to the euro and the pound -  the proximate reasons for its decline were intriguing. For the first time in ages the dollar reacted to the US producer price index data. The core index - excluding food and energy prices - went down by 0.1% in August. It has logged similar declines in recent years but this time investors did not like it.

The other banana skin in the dollar's path was trade. When it emerged that senior US administration officials had invited their opposite numbers in Beijing to another round of talks the dollar took a couple of steps to the rear. Overall the dollar was down by an average of 0.6% against the other ten most actively traded currencies.

Aussie waxes

The Sino-US trade talks story that hurt the US dollar was positive for the Australian one, as it was for most emerging market currencies and for Eastern equity markets this morning. The Aussie received further help from the employment data, making it the day's top performer.

Investors have grown accustomed to being surprised by the Australian jobs numbers, which almost never match analysts' forecasts. That does not prevent them from reacting to the data. Expectations today were for 15k new jobs. When 44k were delivered, the majority of them full-time positions, investors just had to mark the Aussie higher. On the day it strengthened by an average of 0.6%, taking more than a cent and a half off sterling.

The South African rand and the Northern Scandinavian crowns did almost as well. With the rand it was an extension of the previous day's recovery and with the krone it was firm oil prices. For the krona it was continued relief that the weekend election did not go as badly as it might have done.

CBRT, BoE & ECB

Three central banks will be making policy announcements today. Two of them - the Bank of England and the European Central Bank- will probably leave monetary policy unchanged. The Central Bank of the Republic of Turkey, however, is almost certain to deliver a rate increase.

The CBRT announcement will coincide with that of the Old Lady at midday.  At the moment its one-week lending rate is 17.75% and the overnight rate, at which commercial banks have to borrow, is 19.25%. Inflation is around 18% and heading north.

Analysts' guesses for the new weekly rate range from 17.75% to 25.0%.  The word on the street is that an increase of less than three percentage points would send the lira lower again.

USD held back by producer price fall and trade talks

USD held back by producer price fall and trade talks

GBP sidelined ahead of BoE policy decision

GBP sidelined ahead of BoE policy decision

EUR awaits ECB rate announcement

EUR awaits ECB rate announcement

AUD helped by trade talks and employment data

AUD helped by trade talks and employment data

TRY dependent on scale of today's CBRT rate hike

TRY dependent on scale of today's CBRT rate hike

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