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Last week Asia economy review and analysis (August 17, 2010)

Contributed by Daniel Stewart & Company

By Daniel Stewart & Co

China: The dollar even managed a very modest gain against the renminbi as markets chewed over the FOMC move. Inflation crept up again to 3.3% but Industrial Production slipped despite still very buoyant exports (especially to the US).

Japan: The government is tearing its hair out trying to find a way to weaken the tightening noose of a stronger yen. On Wednesday FX traders staged a first test of a 15-year low by taking USD/JPY to 84.73 and it was reported that officials were telephoning the banks to enquire on their order books, which is said to a warning shot on intervention. It is six years since Japan last intervened and the practice is now frowned upon by the G20. Perhaps the best policy would be to let the market get burnt from over-buying the yen and then having to retreat in panic (as happened recently with EUR/USD). The latest economic data is far from bad but progress is still painfully slow.

India: Industrial Production and Manufacturing Output slipped to ‘merely’ 7.1% and 7.3% respectively. This may well please the Bank of India which felt obliged to put rates up twice last month to cool the economy down.