The Japanese government continues to report it has no plans to intervene in the currency market as the yen strengthen against most global currencies.  In fact the yen hit an 8-month high against the US dollar as the belief grows stronger that Japanese businesses will repatriate profits before the end of September.

There has been discussion concerning the likelihood of Japan’s officials intervening in the currency markets to slow the strengthening of the yen.  Some of the nation’s investors and bankers believe the government is making a mistake by not intervening because a stronger yen will reduce export profits and make Japanese goods less appealing to overseas markets.

The yen reached 88.24 yen against the US dollar at one point which is an 8-month high.

The yen also rose against the euro to 130.66 yen per euro.  The Japanese government encouraged funds repatriation by instituting a tax waiver on profits brought home.  Previously there had been a 40 percent tax imposed so the waiver is significant.

Last week crude oil prices for future November deliveries fell to $66.02 per barrel.  This dragged the Canadian dollar down because the Canadian economy has oil as one of its largest exports.  The Canadian dollar weakened to 91.66 US cents or C$1.091.

The US dollar fell to $1.4690 against the euro. The US dollar’s role as the world’s reserve currency continues to be a topic of discussion among world leaders and policy makers.  The most recent comments on the matter were made by Robert Zoellick who is the President of the World Bank.  He said, “The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency.”  The global markets are in transition and emerging markets will be playing a much larger role in the future.

Some believe the heyday of the US as a global economic force is slowly waning.  Though obviously still an economic powerhouse, the US has enormous debt that is predicted to become a long-term negative influence on the ability of the US to maintain sustainable economic growth. Currently the budget deficit is at $1.6 trillion and no end is in sight.

The UK pound fell to US$1.5803. The pound also fell against the euro to 91.89 pence. The Bank of England  has frozen its asset purchase plan at a current level of 175 billion pounds.  There had been discussion concerning a possible increase but the central bank unanimously voted to maintain the current program.

Like US banks, the UK banks are still not financially stable as bad debts continue to rise. In the US it is expected that up to another 200 banks will fail by the end of 2010.  The UK banks also face troubling balance sheets overloaded with toxic assets.

The global recovery is not going to be in a straight curve upward.  In fact, despite solid signs of recovery in the manufacturing and housing sectors, the gains do not justify the withdrawal of government stimulus programs.  In addition, the large majority of banks have been unable to repay bailout funds meaning they cannot stand on their own yet.