South Korean Won Rises On Signs of Economic Strength

Posted August 02, 2009

The US dollar and yen continued to weaken over the weekend as economic data continues to show improvements. The UK pound strengthened as the country’s recession eases. South Korea’s won rose on reports the economy has grown at a six year high pace.

 

The US dollar and yen continued to weaken over the past weekend with the greenback reaching a 2-month low against the euro.  An expected US report on US manufacturing is expected to show continued improvement driving investors to riskier assets with the hope of higher returns.  Though economic expansion is not expected until 2010, investors are anxious to earn higher yields.

The prediction is the US Institute for Supply Management is going to report on Monday that the manufacturing index rose to 46.5 during the month of July.  This shows a continued contracting but the number reflects an easing in the rate of contraction.  The index must be above 50 to reflect economic expansion.  The US economy second quarter contraction was at 2 percent.

The US dollar fell to a 2-month low of $1.4309 against the euro on 31-July-2009 and ended the weekend Sunday night New York time at $1.424.  The greenback also fell against the UK pound to $1.6713 and against the yen to 94.74 yen per dollar.

South Korea reported last week that its economy is growing at a remarkable rate.  In fact the July figures show the GDP grew at a pace not seen in six years.  The South Korean economy grew by 2.3 percent in the second quarter compared to the first quarter of this year. 

The South Korean won strengthened to 1,222.15 won per US dollar.  Another Asian currency strengthening against the greenback is the Indonesian rupiah which reached 9,905 rupiah per US dollar.  In addition, Chinese stimulus spending is creating domestic economic growth. 

The Brazil real strengthened 4.7 percent during July against the US dollar.  It increased to 1.8651 real per US dollar. During 2009 the real has increased by 24 percent.  The July increase was the fifth straight month of gains in the real largely due rising commodity prices creating a growing trade surplus.

Brazil is the largest economy in Latin America. 

The UK pound has been increasing against the US dollar over the last week as the British economy continues to show signs of emerging from the recession.  The pound held against the euro at 85.31 pence per euro, but strengthened against the Japanese yen to 158.12 yen per pound.

Canada’s dollar advanced against the US dollar even though the country’s economic data showed continued weakening.  Investors are betting more on the improving global economy rather than on Canada’s status.  The Canadian dollar strengthened to C$1.0783 against the US dollar which is 92.74 US cents.

The Australian dollar strengthened to a 2-month high against the US dollar.  Late Sunday evening it was at 83.81 US cents per Aussie.  The country’s Treasurer has publicly said that the 3 percent interest rate would rise at some point but there are currently no plans to do so.  The rate will probably be increased in 2010.  The central bank meets this week but no rate increase is expected.

Some analysts are predicting the growing investor risk appetite will abate as it becomes clearer that US unemployment will continue to rise into 2010 and global GDP growth is still many months away.

 

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