Posted November 11, 2009
The Canadian dollar strengthened as crude oil prices rise and fall. The US dollar weakened further against most major global currencies. Australia’s unemployment rate rises for October. The Brazil real weakened slightly against the US dollar.
The US dollar weakened to $1.4984 against the euro. Investors expect a European report tomorrow that will indicate economic expansion is underway. It is expected a .5 percent expansion will be reported for the third quarter of 2009. The embattled dollar lost its favored status as risk taking once again becomes a market factor.
In fact, the greenback is expected to weaken further against the euro and many other major global currencies as Asian equity markets rise. Each time good economic news is announced, more downward pressure is put on the US dollar. The US economy is expected to be one of the last developed economies to fully emerge from the recession.
The specter of what is called a jobless recovery looms in the US. The Atlanta Federal Reserve Bank President, Dennis Lockhart, said that recovery would be at a subdued pace. San Francisco’s Federal Bank President, Janet Yellen, went all the way and mentioned a jobless recovery is possible.
What this means is that US consumers will be feeling the pain of a poor economy for many more months. The benchmark interest rate is expected to be held at zero to .25 percent at least until June 2010.
The US dollar held steady against the Japanese yen at 89.92 yen. The dollar index ended the day at 75.069 in New York. The greenback also held mostly steady against the Australian dollar at 93.03 US cents.
Australia’s economic recovery has experienced a setback with the jobless rate increasing to 5.8 percent in October.
The Canadian dollar strengthened to C$1.0455 against the US dollar. Crude oil for December delivery reached over $80 a barrel at one point before settling at the end of the day at $79.24 a barrel. One Canadian dollar will purchase 95.65 US cents.
In the UK, the Bank of England said it was going to expand its bond purchase program by another $42 billion and would do more if necessary. Some investors had come to believe the BOE was preparing to begin taking steps in preparation for exiting stimulus programs, but it seems they were wrong. The UK recovery is still weak and credit markets are still too tight to spur spending.
The UK inflation rate will remain under 2 percent for the next 3 years according to the bank. This means interest rates will remain at its historic low of .5 percent for months to come. The UK pound weakened against most global currencies in light of Mervyn King’s statements. Sterling fell to $1.6552 against the US dollar and to 90.33 pence per euro.
The Columbian peso has been in the news a lot lately as investors speculated on whether the government would seek capital controls. Upon the news that would not happen the peso rose to 1,965.45 pesos per US dollar. This makes a 15 percent gain this year. The gains in the peso have led to exporters losing profits and thus having to cut jobs.
The Chile peso rose for the sixth consecutive day and is now at 507 pesos per dollar. Argentina’s peso remained close to the same at 3.8145 pesos per US dollar. Peru’s sol rose to 2.8725 sols per US dollar.
The Brazil real weakened to 1.71758 reais against the US dollar. The real has been climbing steadily this year and the weakening is not expected to continue. The real has strengthened by 35 percent so far this year. The central bank and government are clearly going to have to implement stronger policies to halt the appreciation.