The US Federal Reserve interest rate setting arm met yesterday and decided to keep rates at their historic lows of zero to .25 percent.  In fact the committee indicated rates would remain low for a longer period of time and are not expected to be raised for many months. 

The Federal Reserve also was quoted as saying that economic activity is “leveling out” which quickly had an impact on the currency market and investment direction.  Investors were motivated to return to higher yielding assets once again which meant the Japanese yen and US dollar weakened against most major global currencies.

The yen weakened against both the euro and the US dollar.  The yen fell to 96.21 yen per dollar and to 136.81 yen per euro late yesterday.

Canada’s dollar began to strengthen once again against the US dollar.  It rose the most it has in a month as the country’s economic news indicated the recession is leveling out in that country also.  Canada’s trade deficit closed more than economists predicted and crude oil prices are trending upward.

Oil is one of Canada’s primary exports and US oil demand has risen.  Crude oil prices for September delivery rose to $70.36 a barrel.

The Canadian dollar strengthened to C$1.0893 against the US dollar after a four-day decline.  One Canadian dollar bought 91.80 US cents late yesterday New York time. Canada’s economy is expected to expand in the current quarter.

The Brazil real halted this week’s downward trend and rose once again on the news the US interest rates would remain the same.  The real strengthened to 1.8388 real per US dollar making a 26 percent increase year-to-date.   For now, Brazil will not enter the currency swap market as long as the global recession continues to ease.

Also in Latin America, the Columbian peso rose to 2,014.42 pesos per US dollar.  The peso is responding to investor demands for higher-yielding emerging market assets.  Venezuela has talked about lowering its orders of Columbia’s oil to “punish” Columbia for allowing the US to use Columbian military bases.

And also rising against the US dollar was the Venezuela bolivar which strengthened to 6.79 bolivars per dollar.  The bolivar has lost 16 percent this year and President Hugo Chavez has publicly stated his government will take measures to restore “equilibrium” to the bolivar.

Argentina’s peso weakened to 3.8323 pesos against the US dollar.  The Chilean peso rose to 546.12 pesos per US dollar. The Peruvian sol gained and reached 2.929 sol per greenback.

Norway’s krone made currency headlines by increasing against the euro more than it has in almost 10 weeks.  The primary reason is the news the Norwegian economy is doing better than expected.  June numbers are expected to show the rate of economic contraction has eased in the country.

Norway’s central bank is already talking about increasing its benchmark interest rate from the current 1.25 percent at its next scheduled meeting in October 2009.  The krone strengthened to 8.8944 krone per euro which is the highest point it has reached since 1-June-2009.

The Polish zloty rose against the euro to 4.1473 zloty.  Poland’s current account reported a surplus in June which is the fifth straight month such surpluses have been reported.  The surplus is the result of an influx of funds coming from the European Union. 

Mexico’s peso rose against the dollar upon hearing the news the US recession is easing.  The peso increased to 12.966 pesos per US dollar.  A better US economy bodes well for the Mexican economy because of the Mexican reliance on US import orders.