Greece and Slower Growth Plague Currency Market

Posted April 06, 2010

The Greek debt problems cause the euro to fall against the US dollar and the yen in Tuesday trading. The Canadian dollar drops below parity with the US dollar.

 

The currency market on Tuesday saw the yen rise for the third day against the euro. The main reasons for the yen’s growth stem from the problems with Greece as the rescue package seems to be an area of discord among the 16 nations of the euro zone. The Japanese yen has been the higher ground for those looking for some refuge against these concerns.

Euro Trade

The euro fell today to the lowest point it has been at since 1999 against the Australian dollar. This occurred prior to the announcement that European procedure prices fell for the 14th month in a row. In addition, reports from Germany indicate that factor orders have dropped as well. All of this furthers the yen’s growth especially as new speculation that the Federal Reserve will further push for the interest rates in place stay that way for the midterm as a way of helping to sustain the US’s recovery to the world’s largest economy.

Greek Debt Concerns

Economists who thought the Greek debt concerns where behind them when euro nations along with the International Monetary Fund came together to offer a recovery package for the sovereign debt problems were on slippery footing during trading on Tuesday. There is some believe that the Greek’s fiscal problems are still not resolved and that a credible solution has yet to be reached. Some economists believe that if the Greek debt matters are not overcome soon, with a credible solution, that there will be cuts to the global growth outlook.

Canadian Dollar

Also important in Tuesday’s trading was the Canadian dollar. The US dollar fell below parity with the Canadian dollar today for the first time since July of 2008. The dollar fell as low as 99.89 Canadian cents on Tuesday. The dollar eventually moved to 1.0001 Canadian dollars by the later day trading, down from 1.0031 in Canadian dollars from late Monday’s trading. Some economists believe that these sharp gains in the Canadian dollar will cause the Bank of Canada to intervene, or at least threaten to do so, in the foreign exchange markets. When the Canadian dollar improves in value like this, it makes exports more expensive, something the country wants to avoid.

By The Numbers

Against the euro in Tuesday trading, the yen rose to 125.36 at about 9:20 am in Tokyo. That is a move from 125.67 in New York. At that point, it had gained the most since February 23rd. The euro fell from $1.3399 US dollars to $1.3379 in New York. It fell as low as $1.3355, which is the lowest it has been since March 26th. The Japanese yen traded from 93.79 to 93.70 against the US dollar in Tuesday trading.

The British pound also moved from $1.5298 on Monday to $1.5277. This cause was based mainly on the uncertainty over the country’s upcoming elections. If there was a hung government without any type of majority, this could be a problem for the country’s debt concerns.

 

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