Posted September 28, 2009
The Japanese yen weakened against the euro as investors turn to higher yielding assets. The US dollar rose against the euro temporarily halting its downward trend. The Canadian dollar rose against the US dollar.
Is economic recovery in full swing now? The signs would seem to indicate so despite lagging indicators like unemployment continuing to worsen. This recession is unlike any other due to the nature of the mortgage backed securities failure and businesses are proving to be reluctant to add back employees on fears there are still problems in the economy yet to be revealed.
But some economic indicators are clearly improving. For example, the European confidence index is rising. This led to a weakening of the Japanese yen against the euro as investors abandoned the safe haven assets for higher yielding ones.
There is a lot of speculation going on as to whether the Japanese government will intervene in the currency market. A stronger yen can damage the export dependent Japanese economy. Exporter profits are eroded as the yen strengthens. Some financial experts, like the Japanese Trade Minister Masayuki Naoshima, are calling publicly for a study of the impact of the strong yen on the economy.
The yen weakened to 131.45 yen per euro and to 90.01 yen per US dollar.
The European Commission is reporting a significant increase in economic confidence. The index rose to 82.7 in September reaching the highest level since September 2008. This means the new numbers are close to the pre-market collapse.
The US dollar strengthened against the euro to $1.4606.
UK housing prices rose more in September than they have in 2 years. Prices rose .2 percent from August to September. This is good news for the United Kingdom because it indicates credit is loosening. Most of the price gains were found in London and the immediate surrounding area.
The UK pound was at $1.59297 against the US dollar.
The Canadian dollar rose after falling the last four days. The loonie rose to C$1.0869 where one Canadian dollar will buy 92.01 US cents. Canada is planning on expanding a mortgage purchase plan until March 2010. The purpose of the plan is to loosen credit markets.
The Brazil real strengthened for the second straight day as analysts once again predict better growth numbers for the economy. Just last week it seemed Brazil would be experiencing sporadic economic recovery, but analysts have increased the expected growth to 4.5 percent in 2010.
The Brazil real is at 1.7872 real per US dollar. The Brazil gross domestic product grew by 1.9 percent in the second quarter of 2009.
The Australian dollar strengthened against the US dollar to 87.41 US cents. There is speculation the Reserve Bank of Australia is planning on raising benchmark interest rates in November. The expectation is the rates will rise by 25 basis points signaling an official end to the recession for the nation.
An increase in the interest rates will attract investors seeking higher yields.
The G-20 had hoped to develop a global plan for both ending stimulus programs and instituting financial controls to prevent a recession such as this one in the future. The group failed to come to agreement though before ending the meeting over the weekend. It does appear that eventually there will be executive bonus caps put in place in financial institutions.