A Mired Stock Market Reflects Little Interest in Dollar Movement

Posted November 18, 2009

The US dollar rose some against the euro while the stock market did little and investors began to prepare for year end. The Japanese yen rose against most major global currencies. The Canadian dollar fell as oil prices dropped again. The Mexican peso rose as it appears there won’t be another credit downgrade. The South African rand rose on gold price surge.


The US dollar tried to show some strength but did not do well despite a mired stock market.  The dollar index is pushing a yearly low after falling 8 percent this year. But the greenback did manage to rise against the euro to $1.4921. The euro seems to be taking a breather after failing to break through $1.50 per US dollar.

The dollar also rose against the UK pound to $1.6691.

One reason for the dollar’s rise is the 11 percent fall in housing starts for October driving investors back to safe haven investing.

The Japanese yen strengthened against most currencies as investors chose to repatriate funds. The yen rose against the Australian dollar to 82.60 yen per Aussie. One reason for the yen’s strength was found in an announcement by Mitsubishi UFJ Financial Group Inc. that it would be selling shares worth 1 trillion yen.

The yen rose against the euro to 133.04 yen per euro.

The Australian dollar fell to 92.62 US cents as the economy struggles to hold on to recovery. It appears the central bank will not be raising interest rates in December as was speculated.

The Canadian dollar dropped for a second straight day largely due to declining oil prices. Oil has been hovering around the $80 per barrel mark but has been dropping the last few days.  It is currently at $79.70 but has been over a dollar lower per barrel recently. The Canadian dollar is at 94.86 US cents or C$1.0542.

Canada’s consumer price index rose in October 2009 compared to the same time period last year. Signs of developing inflation are seen in an inflation rate of 2 percent which is higher than anticipated by economists. The question right now is whether this is the start of a trend or if the inflation rate will be offset by price decreases in November.

It appears Mexico might be able to escape another downgrading in its credit rating.  As a result the peso strengthened to 13.0114 pesos per US dollar. The Mexican government passed a budget for 2010 that trims the deficit to .75 percent of the GDP.  On the revenue side the sales tax was increased by 1 percent.

Mexico’s political parties have been in disagreement over how to close the 2010 budget deficit.  It was important the government pass a reasonable budget showing progress in reducing the deficit in order to avoid a credit downgrade.

The South African rand strengthened as gold prices increased to US$1,150 per ounce. The rand was at 7.4052 rands per US dollar. Gold is a major export of South Africa.

The International Monetary fund has issued its current forecasts for GDP growth for 2010. The global economy is expected to expand by 3.1 percent.  China will grow by 9 percent compared to a 1.5 percent in the US and .3 percent in the Euro-Zone.

Investors are looking more and more to Asia for profits as the emerging markets seem to be more resilient and better positioned for growth in the near future than larger developed economies.