Posted April 02, 2009
The US economy is showing signs the recession has hit bottom and a recovery may start soon. The US dollar weakened against many global currencies, while the UK pound outperformed its counterparts as data improved there also.
There are some signs of economic life in the United States which should bring some needed good news to the European Union and emerging markets. Economic data, such as retail sales figures for March, are showing the recession has most likely bottomed and now begins the painful recovery.
At the G-20 meeting, President Obama has made it clear though, the US will problem never be the same ravenous world consumer it has been in the past. At least it is hoped the US and the rest of the world have learned something from all of this including the need to only sell assets that have real and true value.
The US dollar showed some continuing weakness as investors sought more lucrative assets. The continued strengthening of housing sales numbers and the rate of new unemployment claims dropping is causing investor sentiment to improve and encouraging them to assume higher risk assets.
The US dollar fell against eruo to $1.3235 and against the New Zealand dollar to 56.8 US cents. The greenback also weakened against the UK pound to $1.4430 dollars per pound. The dollar weakness is a subject of discussion among the world leaders and investors, because President Obama has submitted multi-trillion dollar budget to Congress. Some analysts believe this is going to establish an unsustainable pattern of debt.
The Japanese yen decided to take a roller coaster ride yesterday. The currency fell dramatically after President Obama announced he was not giving more bailout funds to General Motors or Chrysler at this point. But then it recovered nicely to 98.71 yen per US dollar. The yen fell against the euro to 131.10 yen per euro.
The Australian dollar strengthened to its highest level for a week on the news the government is implementing a new stimulus program. The Aussie rose to 70.31 US cents. It also rose against the yen to 69.44 yen per Australian dollar. The gains are not expected to hold if the European Central Bank follows through with a lowering of the benchmark interest rate.
The UK finally had a bit of good economic news. The March Manufacturing PMI data showed improvement. That is why the UK pound outperformed most other EU currencies yesterday.
China is still saying they are very concerned about the financial condition of the US which means they are concerned about the amount of their investment in US Treasuries. Currently they own about $740 billion of the US debt.
China has been busy making yuan swap agreements with a host of Asian countries and has begun its move on Latin America. Analysts believe China is setting itself up for less reliance on the US dollar by developing an international currency reserve that is not dependent on the US dollar. This will enable importers to use a currency besides the US dollar for payments.
The yuan has strengthened against the US dollar to 6.8343 yuan per dollar.
The European Central Bank is considering intervention in the currency market which is causing a ripple through some currency markets. The Central and Eastern European currencies strengthened against the euro as a result.
The Hungarian forint rose to 301.92 forint per euro. Also strengthening was the Czech koruna to 27.004 koruna per euro and the Polish zloty to 4.497 zlotys per euro.
It is heartening to know economic conditions are showing some signs of life in the US. The sheer economic power of the US means its financial health is important globally. But what is also becoming clear is that the US no longer has the same power it had in the past to manipulate other countries when it comes to handling their own financial affairs. The G-20 will announce a joint global economic program today, but you can be assured it will not be the one President Obama has been pushing.