Currencies Active On News of Improving US Earnings Reports

Posted July 15, 2009

The yen and US dollar fell against most global currencies as world equity markets rose. The Mexican peso rose for the first time in two weeks. The South African workers' strike was settled and the rand strengthened. The UK pound strengthened as jobless claims fell.


The currency market was busy yesterday as analysts and investors continue to try and get a fix on the state of the global recovery.  There are continuing signs of economic life but the impact of the recession is still being strongly felt in several areas.  For example, US unemployment sits at 9.5 percent and is expected to continue to rise. US President Barack Obama has publicly stated that recovery will be slow.

In addition, the stimulus funding injected into economies around the world is creating a new problem.  How are the programs going to be unwound without damaging a recovery?  In the financial sector, banks are holding stimulus funding on balance sheets though Goldman Sachs has said it is ready to pay back the US government the TARP funds it was given early in the market collapse.

But equity markets are rising as US earnings reports show profit improvements that are beating expectations.  As would be expected, the safe haven Japanese yen and US dollar fell against most global currencies as stocks rose.

The yen weakened against the euro to 131.71 yen per euro on the news Intel Corporation’s revenues were greater than expected.  It also fell against Sweden’s krona to 11.98 yen.  The yen did stay about the same against the US dollar at 93.48 yen as the dollar fell also.

Japan’s central bank voted to keep the .1 percent benchmark interest rate unchanged.
The US dollar fell against the euro to $1.4093.   The dollar also weakened against the South African rand to 8.164 rand per dollar.

The South African rand rose as construction workers called off a strike.  The workers building the World Cup Soccer stadium have been on strike for the past week adding to the country’s economic problems. 

US economic data is showing signs of improvement.  Industrial production fell at a slower pace in June at .6 percent.  The drop was 1.1 percent in the month of May.  Good news is coming from the United Kingdom also as new jobless claims slowed in June.

The UK pound rose to US$1.6412.  The recent decline in sterling rates was not considered reflective of economic conditions and a correction is expected to occur against the US dollar in the coming weeks.  Some analysts are predicting a rapid rate of recovery in the UK despite predictions up to this point claiming a slow recovery pace should be expected.

The pound also strengthened against the yen to 153.74 while falling slightly against the euro to 85.71 pence.

The Bank of England has decided to wait until August to determine if it will be necessary to expand the asset purchase plan.  Currently the country is facing threats of deflation as the UK inflation rate fell below 2 percent.

The South Korean won strengthened against the US dollar to 1,278.35 won per dollar.  This was the second straight day it has risen.

The Mexican peso strengthened to 13.6750 pesos per US dollar.  This is the first time it has risen in close to two weeks.  The rise is attributed to signs of economic recovery in the US which accounts for 80 percent of Mexico’s exports.

The Brazil real also strengthened as the US dollar fell.  The real rose to 1.9538 real per US dollar.

As the price of a barrel of crude oil rose to $60.86 for August delivery, the Canadian dollar appreciated against the US dollar.  This rise was the third consecutive day the loonie has increased.  The Canadian dollar rose to 88.96 US cents or C$1.1222.