Japanese Yen Rises After Democratic Party Wins Election

Posted August 31, 2009

The Japanese yen advanced against the euro after the Democratic Party of Japan won the election on a platform of economic recovery. The Euro Zone is expected to recover more quickly than the UK from the recession. The Canadian dollar fell as oil prices dropped and unemployment continued to rise.

 

The yen advanced further against the euro making the fifth straight day of increases.  Japan held elections and the Democratic Party of Japan had a sound win that equates to a power shift.  The electorate clearly believes that the Democratic Party can do a better job with the economy.  Japan has been in recessionary doldrums and is ready for clear signs recovery is beginning.

The Japanese yen rose to 132.47 yen per euro and it also rose against the US dollar to 92.67 yen.  Yen appreciation is predicted to continue if the country’s investors begin to increase Japanese asset holdings.  The new party has promised to lower taxes and reduce government spending.

The euro advanced to $1.4295 against the US dollar and to 87.99 pence against the UK pound.  The euro has risen against the pound as the Euro Zone continues to show signs of faster recovery than the UK economy.

Germany is expected to report retail sales rose in July by .7 percent which is the first increase in 3 months.  Also rising is the consumer sentiment index indicating a gradual improvement is occurring.  The European Central Bank will most likely maintain the benchmark interest rate when its members meet this week.

The US dollar will probably continue to weaken as the economy shows definite signs recovery is beginning in certain areas.  The US manufacturing numbers issued by the Institute for Supply Management show an increase to 50.5 in August compared to July’s 48.9.  Jobless rates are declining at a slower rate also. 

Canada’s dollar fell against the US dollar by 1 percent over the last 5 days and 1.3 percent for the month.  This was actually a welcomed decline because too much loonie appreciation too quickly could jeopardize the country’s economic recovery.

The loonie fell to 91.60 US cents or C$1.0917 against the US dollar.  Canada’s second quarter current-account deficit set a new record at C$11.2 billion.  The price of oil has been falling again also for October deliveries and is now at $72.72 a barrel.  But like the US the unemployment numbers continue to rise though at a decelerating rate.

The Brazil real weakened against the US dollar as US retail numbers for July showed a slowing in consumer spending.  The real fell to 1.8812 real per US dollar on signs the US recovery will be slower than originally expected.  In fact there are concerns that global recovery will be slow which would negatively impact exports.

Currently the Brazil benchmark interest rate is at 8.75 percent.

The International Monetary Fund added $250 billion to the global currency reserve accounts in an effort to keep improving economic activity advancing.  Participating nations can convert IMF Special

Drawing Rights money into currency through exchange agreements.  This process does not increase lending but makes it easier for countries needing hard currency to obtain what is required for economic purposes.

The UK pound fell against the US dollar as the UK struggles to emerge from the recession.  The pound weakened to $1.6307 against the US dollar.  The UK economy is not emerging from the recession as quickly as the Euro Zone as the UK GDP contracted by .7 percent in the second quarter of 2009 compared to a GDP expansion in France and Germany for the same time period.

Poland’s zloty rose against the euro to 4.0924 zloty per euro.  Poland’s economy grew by 1.1 percent in the second quarter of 2009.  It is believed Poland’s economy is now on track for recovery.

 

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