Posted December 29, 2009
The US dollar rose against the euro and yen while falling against the Australian dollar and South African rand. The euro rose against the yen. The Swiss franc continued to appreciate against the euro. Canada’s dollar continued to rise against the US dollar. Israel’s central bank increased the interest rate by a quarter percentage point. The Brazil real rose against the US dollar while other Latin American currencies produced mixed results.
The US dollar rose against the euro to $1.4378 and the yen to 91.63 yesterday and then continued to appreciate Tuesday morning against the yen while falling against the euro. The dollar fell against the Australian dollar. The Australian dollar buys 89.89 US cents.
The South African rand also continued its upward trend and appreciated to 7.4088 rand per US dollar. The rand and Aussie appreciated as commodity prices rose. Copper hit a 15-month high and has gained 136 percent in 2009. The rand is also appreciating as the US dollar strengthens and investors are trading dollars for rand.
The US economy continues to show signs that the recovery is gaining steam. October home prices rose while consumer confidence indices show a growing belief the economy is getting better. Holiday sales are expected to show a one-percent increase in December over the previous December.
The Federal Reserve is almost certain to raise interest rates in June 2010 if the economy continues to improve. The expectation at this point is that the interest rate will be increased by a quarter percentage point.
The euro rose to 132.46 yen. The Swiss franc also continued to appreciate against the euro to 1.4853 francs per euro.
Canada’s dollar has been appreciating and has now strengthened to a 2 month high. The loonie is at C$1.0386 when paired with the US dollar. One Canadian dollar will buy 96.29 US cents. The Canadian dollar is appreciating as both the Canadian and US economies improve and China shows interest in expanding its Canadian investments.
In other parts of the world, other countries are taking action to deal with an improving global economy and high levels of government debt. Yesterday the central bank of Latvia sold 74.3 million lati for euros. The sale was the equivalent of US $151 million. The lati is pegged to the euro within a 1 percent band.
The Bank of Israel has been raising its benchmark interest rates. Yesterday the rate was raised again for the third time since the start of the recession. The central bank increased the interest rate to 1.25 percent after voting for a quarter of a percent increase. Israel is attempting to slow the inflation rate which increased to 3.8 percent in November. The interest rate is expected to be increased further as the economy expands. In the third quarter of 2009 the GDP was already growing at 2.2 percent.
Brazil’s real appreciated against the US dollar to 1.7417 real per dollar as commodity prices and the US economy strengthen. The Chile peso remained stable at 506.50 pesos per dollar. The Peru sol feel to 2.8845 sol per dollar.
The Mexican peso fell to 12.9899 pesos per dollar as the economy remains flat. The central bank has a new Governor, Agustin Carstens, who has indicated that inflation is not a threat yet. The benchmark interest rate will not change any time soon.