Posted November 17, 2009
The US dollar strengthened in response to Fed Chair Bernanke’s comments on a strong dollar, but it’s not expected to endure. The Canadian dollar fell as investors moved back into safe haven assets. Chile’s peso rose as bank keeps interest rates low. Obama and Jintao continued to meet over currency and trade issues.
The US dollar strengthened yesterday but it is not expected to last for any significant period of time. The dollar rose after US Federal Reserve Chair Ben Bernanke indicated he supported a strong dollar and the Fed is keeping an eye on the declining dollar.
Mr. Bernanke’s comments were then followed by a statement from European Central Bank President Jean-Clause Trichet concerning the need for a sound U.S. dollar. Though everyone agrees on this issue the greenback continues to weaken and will do so over the long run. This became apparent when the Federal Reserve indicated U.S. interest rates would be kept low for the foreseeable future.
The US dollar was at $1.4877 per euro and at 88.73 yen per dollar. The Australian dollar weakened to 93.12 U.S. cents.
The strength of the Canadian dollar has been an issue over the last couple of months but yesterday it fell to C$1.0619 against the US dollar. One Canadian dollar will purchase 95.18 cents. At one point there was concern the Canadian dollar would achieve parity but that does not seem likely now.
The Chile peso showed strength today as the central bank decided to maintain low interest rates until the middle of next year. The peso strengthened to 493.65 peso per US dollar. This makes an 11 percent increase in the last month.
In other parts of Latin America the following currency news was reported. The Argentina peso held steady at 3.8135 peso per US dollar. The Venezuelan bolivar weakened to 5.435 bolivars per US dollar. The Peru sol strengthened to 2.866 sols per dollar.
The Brazil real weakened to 1.7134 reais per dollar. The real has strengthened by 35 percent this year alone causing great concern about the currency’s impact on economic recovery. Brazil’s economy will probably expand by 5 percent next year with Brazil seen as a leading emerging market.
The UK pound strengthened against the euro as the UK economy continues to show signs of improvement. The first signs of inflation are appearing even as the economy expands. The Bank of England expanded its bond buying program by 25 billion pounds at its last meeting as the members consider it too early to begin exiting stimulus programs.
The UK pound rose to 88.35 pence per euro and weakened a bit to $1.6777 against the US dollar.
The Polish zloty weakened after the US indicated that economic recovery would be long and slow (Bernanke called the forces of resistance ‘economic headwinds). The zloty fell to 4.1049 zlotys per euro.
The Hungarian forint fell against the euro for the same reason to 266.19 forints per euro.
President Barack Obama and Chinese President Hu Jintao continued to meet over a number of issues. The US President has been encouraging cooperation between the two nations but both government officials have strong opinions about matters of trade, currencies, and climate control. Many people in the US see China as an economic threat to US production and jobs stability.
China’s yuan has been held at 6.83 yuan per US dollar. President Obama requested that China allow the yuan to appreciate under normal market operating conditions. A yuan appreciation would eliminate some of the current trade imbalances. President Hu was silent on the issue.
China has made clear its concerns about trade protectionism policies coming out of the US.