Tracking Currencies and Fractions

Posted September 04, 2009

The US dollar weakened against the UK pound as US unemployment numbers indicate slowing in job layoffs. The Japanese yen fell against the New Zealand dollar as Asian stocks rallied. The Brazil real rose as emerging markets began to look attractive once again.

 

The US dollar weakened against the UK pound as a US report showed a slowing in the number of job layoffs to 230,000 in August.  Unfortunately the total joblessness rate rose to 9.7 percent even though the number of layoffs is declining.  Unemployment is considered to be a lagging indicator and will probably be the last number to change course during the recovery period.

The greenback weakened to $1.6326 against the UK pound. The dollar also fell against the Japanese currency to 92.62 yen. This will make the fourth straight week of losses for the US dollar when paired with the yen.

A recent UK government report showed the country’s service industries are expanding at a faster rate than estimated.  A recent survey of purchasing managers indicated the service industries index is at 54.1 and expansion is at a 2-year high. This is yet another indication the economy is trying to pull out of the recession.

The Japanese yen weakened against the New Zealand dollar as Asian equity markets rise.  The yen weakened to 62.86 yen.

Analysts have noted recently that even fractional changes in numbers are still leading to over-responses in investment markets.  For example, a fractional GDP contraction can lead to large percentage changes in currency values.  A fractional drop in an equity market leads to a major shift in currency trading strategies.  This is all a sign of the nervousness that remains in the markets due to the mixed economic signals being sent.

The euro experienced only small changes when paired with the US dollar ($1.4257) and the UK pound (87.32 pence).  Looking at the weekly numbers, the euro experienced a weekly decline for the first time since 7-August-2009.

The European Central Bank Governor Trichet agrees with US Federal Reserve Chairman Ben Bernanke that the global recession recovery will be uneven.  The ECB kept the benchmark interest rate at 1 percent which is an historic low.  The ECB also plans on keeping stimulus programs in place until recovery is in full progress.

The Canadian dollar advanced against the US dollar to C$1.1026 or 70.70 US cents.  Crude oil prices are hovering around $68 a barrel for future October delivery.  Oil and raw commodities make up over half of the Canadian exports.

Canada’s unemployment continues to rise but at a declining rate.  In July 44,500 people lost their jobs compared to 15,000 in August.

The Brazil real advanced against the US dollar to 1.8603 real per dollar.  This makes a 24 percent increase in the real year-to-date 2009.  The gain is attributed to reports the G-7 economies will not contract as much as was originally expected.  This will lead to investor demand for emerging market assets.

Another explanation for the Brazil real increase is the gains in the Shanghai Composite Index.

Sweden’s Riksbank governing board decided to keep the country’s benchmark interest rate at .25 percent.  The Swedish krona weakened against the euro to 10.3359 krona per euro.

 

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