Posted May 29, 2009
The Japanese currency rose as industrial output figures for April show an increase. Columbian peso led Latin American currencies in gains. Canada's dollar rise as oil prices increase.
Japan’s April industrial output rose by 5.2 percent which is the second straight month gains have been reported. The yen strengthened against the US dollar and euro as a result. On Thursday, 28-May-2009, the yen was at 96.44 yen per US dollar and 134.65 yen per euro.
The Bank of Japan Governor has said the Japanese economy will begin growing this quarter. This is great news for a country that experienced a 15.2 percent contraction in the first three months of 2009.
The US dollar weakened against the euro to $1.3958 as investors continued their search for higher yields. The US currently has interest rates near or at zero percent. The US Treasury held a successful 7-year note auction this week, but the country is in a position of printing money and then buying its own debt. There is concern that this unsustainable economic policy will lead to severe inflation combined with a weak dollar in the near future.
US unemployment claims fell last week to 623,000. This news coupled with the rise in oil and commodity prices indicates the economy is on track for a rebound. But analysts are warning that at some point buyers will lose their appetite for US government debt. The price of a barrel of light sweet crude oil rose to $65.08 which is the highest price seen in six months.
The UK pound fell against the euro after the Bank of England indicated the UK economy will probably not begin growing this year. The pound fell to 87.46 pence against the euro. It did hold its position against the US dollar though at $1.5947.
The gloomy economic outlook is supported by the news that UK retailers expect to report a 17 percent decline in May sales. The UK economy is predicted to contract 4.1 percent in by the end of 2009. The International Monetary Fund has recommended the government lower its debt and reduce spending.
Mexico’s peso continues to fluctuate with the peso strengthening yesterday against the US dollar after three straight days of declines. The US government reported that the US orders for durable goods increased by 1.9 percent in April leading to speculation that Mexico’s exports will begin to rise.
The Mexican peso strengthened to 13.2142 peso per US dollar. Mexico is experiencing a growing budget deficit that could impact its credit rating. Standard & Poor’s has already lowered the credit rating outlook to negative which foreshadows a possible debt rating reduction.
The Columbian peso strengthened to 2,175.55 pesos per US dollar as the currency led Latin America in currency gains. The rise is attributed to investors turning to emerging market currencies while looking for higher yields.
The bank is expected to lower the overnight lending rate in Columbia to 5 percent today.
Chile’s peso has strengthened 3.2 percent in May against the US dollar and reached 563.85 pesos per dollar. The Argentina peso fell to 3.7385 peso per US dollar as did the Venezuela bolivar. The Venezuelan bolivar is at 6.59 bolivars per US dollar.
The Canadian dollar strengthened against the US dollar to 89.71 US cents. The gain is largely due to the rise in oil prices and a sell-off of the US dollar. Some analysts are predicting the Canadian dollar will reach parity with the US dollar by the end of the year.