Dollar Falls in Asian Currency Markets
Dollar Movement
In the last few months, since November, the US dollar has gained 12 percent against the euro. However, in the Asian currencies, the US dollar has fallen back, down about four percent against the Indian rupee, down three percent against the Thai baht, down four percent against the Indonesian rupiah and a massive six percent against the Malaysian ringgit. The Taiwan dollar moved to a 19 month high against the US dollar in trading, to 31.56, an increase of 1.3 percent. The US dollar moved to 93.22 yen, though it was traded as far as 93.15 in trading on Wednesday. That is the weakest level it has been at for the last week.
Dollar Versus Dollar
The dollar also appears to be weaker when compared to the Canadian and the Australian dollars. These countries, known for their strong currencies because they are commodity based, are benefiting primarily from the demand coming from China for raw materials. The dollar moved to $1.0035 Canadian dollar, in Wednesday trading.
Strength in Asian Economies
Economists believe that the strength of the Chinese economy, and Asian economies in general, is likely to continue to push these economies forward even as the US returns to strength. China is at the forefront as a powerhouse economy. This was only further strengthened on Wednesday when the World Bank said it was raising the growth forecast a full percentage point to 8.7 percent this year, on the developing Asian markets.
Euro Movements
The euro seems to still be struggling. In Wednesday trading, the euro moved lower to reach the year's lows against the US dollar. The factor holding back the euro is the Greek debt problems. Greece's borrowing costs hit an all new high leading its banks to ask for help. The euro traded closer to $1.3267. That is the lowest it has been since May 2008. It fell 0.1 percent to $1.3330. The euro also fell against the yen to 124.47, a drop of 0.2 percent.
Brazil Currency Falls
Not only is the Greek debt concerns affecting the euro but it is also plaguing the Brazilian currency as well. During trading on Wednesday, Brazilian stocks fell significantly and the country's currency fell as well, mostly on behalf of the Greece fiscal concerns. The currency fell 1.3 percent to 1.778 per US dollar. The US dollar was seen as a stronger option over the Brazilian currency, especially as the Greek debt concerns weigh heavily on the Brazilian marketplace. With the euro too risky, this also makes the Brazilian currency risky.
Recovery Stalled?
One of the biggest concerns over the lack of growth in the value of the euro is that this signals a slowing or stalled recovery in the euro zone in particular. The European Central Bank meets to determine if it will keep interest rates at this record low in an effort to stimulate or revive growth in the area.
China's a Powerhouse With Problems
China also has a banking system that does not aid large pockets of the economy. For example, small businesses have problems getting credit and major areas of the country are rural. Yet small businesses are exactly what policy makers should be promoting.
On the surface, a trade war between the U.S. and China would not serve either country’s purposes. But anyone who has followed China can tell you that the government may not act completely rationally if pushed by the U.S. through the imposition of tariffs in response to Chinese currency manipulation. That’s probably why Geithner decided to give China more time to let the renminbi appreciate some. The U.S. talks tough one day and then backs down the next. It’s the same approach it’s using with Iran over nuclear weapons.
If the U.S. and China get into a trade war over currency manipulation, China has several ways to get “even”. One of them is to stop buying U.S. Treasuries. That would not be good for the U.S. until it can reduce its national debt. The China-U.S. relationship is has gotten decidedly more complex as a result of the recession.