Posted January 03, 2010
The US dollar rose against the yen and is expected to continue to do so in the near future. The UK pound weakened further against the US dollar as the government indicates support for the weaker pound. The Canadian dollar rose against the US dollar as Canadian unemployment falls. The Brazil real was the leader among emerging market currencies for 2009. Argentina’s peso fell as the government works on restructuring debt due this month.
On an annual basis, the dollar lost 2.5 percent against the euro and gained 2.6 percent against the Japanese yen for 2009. The euro appreciated to 5.1 percent in 2009.
As the New Year began, the Japanese yen traded even lower as it weakened in the face of a stronger US economy. As the US recovers from the recession while Japan’s economy struggles, investors are buying US assets seeking improved profits. The yen fell to 92.91 yen per US dollar and to 132.65 yen per euro.
The Bank of Japan has indicated it is planning on implementing policies to jumpstart economic growth and that will probable mean an injection of yen stimulus funding. If so, the yen can be expected to weaken further.
The US dollar was at $1.4273 against the euro. The US Institute for Supply Management is ready to issue a report indicating the US factory index has risen again to reach 54. Anything over 50 shows a positive condition.
The UK pound, on the other hand, continued to weaken to $1.6106 against the US dollar. The depreciation was due mostly to the UK government business policy makers stating a weak pound benefits the UK economy. The UK dollar weakened by 19 percent against the US dollar in 2009.
The Canadian dollar has posted an annual gain in 2009 against the US dollar. This is the largest gain posted since 2007. The Canadian economy is recovering at a quick pace and that is leading to strong performance of the loonie. Unemployment has begun to decline and home prices are rising, both of which are signs of an economy on the mend. Also supporting the loonie is the rising price of oil. Crude oil is now over $80 a barrel for February deliveries.
The Canadian dollar rose to C$1.0532 against the US dollar which means one Canadian dollar buys 94.94 US cents. It is expected the Canadian dollar will reach parity with the US dollar sometime in 2010.
The Canadian unemployment rate fell to 8.5 percent after adding 79,100 jobs in November. The benchmark interest rate is expected to remain at an historic low of .25 percent through June 2010.
The Brazil real put in an amazing performance in 2009. Brazil’s economy has been the strongest among emerging markets and the real rose more in 2009 than it has since 1993. The real gained by 33 percent against the US dollar on an annual basis. The Brazilian stock market, the Bovespa, also showed strong gains increasing by 83 percent in 2009 largely due to stocks related to the housing and construction industries.
The real ended 2009 at 1.75 against the US dollar. Brazil has recently created a sovereign wealth fund originally intended to cover possible debt defaults in 2010. Instead the fund will buy US dollars in the foreign exchange market and attempt to slow the appreciation of the real.
The Argentina peso lost 9.1 percent against the US dollar for 2009. Currently at 3.799 pesos per US dollar, the government is attempting to restructure $20 billion in debt due in less than 2 weeks.
Many markets were closed around the world on Friday to mark the start of the New Year. Today starts the first normal day of operation in the 2010 currency market.