Posted January 10, 2010
The US dollar weakened against most major global currencies. The Australian and New Zealand dollars strengthen on the news Chinese imports and exports rose significantly in December. The South Korean won rose against the US dollar. The UK pound rose against the US dollar as UK inflation appears in housing prices.
The US dollar slipped against the euro and most other major global currencies. In fact, the greenback fell to the lowest it has been against the Canadian dollar since October.
The US dollar weakening is due to the global recovery that is underway. Though the recovery still has a long way to go before it can be called a stable trend, investors are seeking higher yielding assets to recover lost profits.
The dollar fell to $1.4512 against the euro and to C$1.0260 by late Sunday evening New York time.
The Australian dollar put in a strong performance and rose to 93.10 US cents. The Aussie rose on the news that Chinese exports rose 17.7 percent in December 2009 compared to December 2008. Even more encouraging is the news that imports have risen 59.9 percent. Good economic news benefits both Australia and New Zealand both of which are trading partners.
Australia exports iron and coal to China. Canada exports oil and natural gas to the United States. Oil is one of Canada’s largest exports, and as the US economy recovers, the demand for oil will rise.
The Australian and Canadian dollars are expected to reach parity with the US dollar in 2010. The New Zealand dollar strengthened against the US dollar to 74.11 US cents.
There are six currencies that have been named commodity currencies because their values rise and fall with commodity prices. The six currencies are the Australian dollar, Canadian dollar, Brazilian real, Norwegian Krone, New Zealand dollar, and South African rand. Here is an interesting fact: statistically the US has pulled out of economic slumps when commodity prices, the Australian dollar, and the Canadian dollar rise. All three are currently occurring right now.
The US economy is now projected to expand by 2.6 percent in 2010.
The South Korean won rose against the US dollar to 1,118.25 won per dollar. South Korean exports are improving at a rate not seen since last December. This was the seventh day straight the won has risen against the greenback.
The UK pound rose against the US dollar to $1.6022. The pound rose as UK producer prices rose by more than expected. UK house prices rose by 1 percent in December. As UK inflation increases, the government will be considering stimulus exit strategies and a tightening of monetary policy to control rising prices. The Bank of England has pledged to complete the planned 200-billion pound bond-purchase program. The concern investors have is that the central bank will continue the asset purchase plan past its current limits.
The UK economy is predicted to grow by 2 percent in 2010.
The Mexican peso posted a weekly gain last week against the US dollar. The peso rose to 12.6970 pesos per US dollar as of late Friday New York time. The peso rose on the expectation the US Federal Reserve will not raise benchmark interest rates in view of the loss of 85,000 jobs in December.
With developed economies still struggling to keep economic recovery on target, emerging markets are expected to lead the global recovery. In addition, emerging market nations have much higher interest rates which attracts foreign investments.
In Venezuela, uncertainty exists concerning monetary policy. Venezuelan Hugo Chavez devalued the currency on Friday. He set two peg rates for the bolivar at 2.6 and 4.3 against the US dollar.