The US dollar weakened against the euro again causing concern the dollar is going to continue to follow the predicted path through the end of the year.  Statements by Donald Kohn who is a Vice Chairman with the US Federal Reserve publicly stated that interest rates would be kept low for the foreseeable future.

The US dollar weakened to $1.4900 against the euro.  This is the weakest the dollar has been against the euro since as far back as August 2008. 

The US dollar has weakened so much against the Canadian dollar it is close to parity at $1.0281. Predictions differ as to when it will reach parity but it will be before year end unless something unusual happens to interfere with the market trend.  The fear is the rapidly changing exchange rates are going to change the global economic system and the pace of recovery. The Dollar Index fell to 75.541 which is also a low not seen since August a year ago.

Rising commodity prices are directly impacting the Canadian dollar.  Oil has risen to $75.15 for future December delivery.  It was under $70 a barrel a short time ago. Oil is one of Canada’s major exports.

The Canadian dollar has been steadily gaining over the last 5 days as a result of rising commodity prices.  The loonie has risen by 2.5 percent against the US dollar over the last week.

The Japanese yen has risen to 89.09 against the US dollar.  The Bank of Japan decided to leave the benchmark interest rate unchanged.  That means interest rates are at historic lows at .1 percent and that will remain true well into 2010.

The Australian dollar rose to 91.46 US cents as the country’s recovery quickens its pace.  Australia’s largest trading partner is China and the import/export numbers are showing signs of increasing Chinese domestic demand.  This is good news for Australia and China.  China has been encouraged by the International Monetary Fund, the G-7 and the G-20 to increase its domestic demand.

The Mexican peso strengthened to 13.1187 pesos per US dollar. As has been reported, the Mexican government is trying to plug a huge 2010 budget deficit and there has been disagreement as to how this can be accomplished. Mexican President Felipe Calderon has been relentless in his efforts to raise taxes and cut spending in order to balance the budget.  The budget deficit continues to widen as oil prices fluctuate.

The Brazil real has strengthened to 1.7110 real against the US dollar.  Investors have been purchasing the country’s higher yielding assets and Brazil is seen as a leader among emerging markets.  As currency trader Jose Carlos Amado told Bloomberg, “there is a torrent of dollars in the market due to share and debt sales, such as the one by Banco do Brasil yesterday, which showed high demand  ( for Brazilian assets abroad)”.

The Brazilian economy is expected to continue to improve at an even faster pace than economists have predicted.  This is true for most of Latin America as a matter of fact.  Up to 3 percent growth is expected next year while more developed nations are expected only 1 percent or less expansion.