Financial Markets…Japanese yen has seen the strongest appreciation against the US dollar in 8 months with a 1.4% gain. Yen strengthened to 88.35 per dollar, after the Bank of Japan announced a delay in adopting a new open-ended asset purchasing program, which will start in January 2014. The yen also gained against the euro, rising 0.8% to 118.31 per euro.
Spanish government bonds advanced, with the yields on 2-year and 10-year bonds sliding by 7 bps and 8 bps, respectively, after the government said it generated €24 billion (record high) demand in the auction of a new 10-year Treasury security.
Romanian government issued its first euro-denominated bond this year, selling €150 million of 3-year bonds in the local market. The average yield for the new bond is expected to be between 3.15% and 3.25%, which will be a record low yield for the country’s 3-year securities. The country sold a similar-maturity bond with a yield of 3.4% in November.
High-income Economies…Germany's economic confidence strengthened in January to the highest level since May 2010, with the ZEW economic sentiment index surging 24.6 points to 31.5 on improved economic outlook.
Economic expectations for the Euro Zone also improved significantly in January, with the ZEW economic sentiment index improving by 23.6 points to 31.2.
The Bank of Japan (BOJ) has adopted a 2% inflation target and an open-ended asset purchase program in its effort to overcome disinflation and stimulate economic growth. The new open-ended asset purchase program will start in January 2014 after an expiration of the current 101 trillion yen asset purchase program. The BOJ also held its benchmark overnight call rate steady at 0-0.1%, unchanged since 2010. Japan's inflation rate was -0.2% (y/y) in November.
According to the National Association of Realtors, existing home sales in the U.S. reached a five-year high in 2012. On a monthly basis, however, existing home sales dropped 1% in December to 4.94 million annual rate from 4.99 million in November, restrained by the low supply of properties.
Developing Economies…Turkey's central bank cut its overnight lending and borrowing rates by 25 basis points but kept its benchmark one-week repo rate steady at 5.5%. The overnight lending rate, which forms the ceiling of the interest rate corridor, was cut to 8.75% from 9.0% and the borrowing rate, which forms the bottom, was cut to 4.75% from 5.0%. Inflation dropped in December reaching 6.16% (y/y), but remains above the Central Bank’s 5% inflation target due to earlier increases in administrative prices.
South Africa’s leading indicator of business activity, compiled by the Reserve Bank, increased for the fifth consecutive month in November rising by 0.8% (m/m) to 131.5.
The unemployment rate in Mexico has fallen to 4.47% in December 2012 from 5.12% in November.
Russia’s producer price index fell 1.1% (m/m) in December 2012 indicating weakness in demand. On an annual basis, Russia’s producer price index showed a 5.1% increase in December compared to a 6.7% increase in November.