Euro Continues to Climb Against US Dollar

Posted October 22, 2009

The euro continued to rise against the US dollar as the global economy improves. The Canadian dollar weakened after the central bank indicated currency market intervention is possible if the loonie continues to strengthen over the long term. The UK pound weakened on reports September retail sales were stagnant.


The US dollar fell to $1.5045 against the euro as investors continued to move funds into higher yielding assets. The German business confidence index is expected to show improvement and that is pushing the euro up. Risk appetite has been strong and big companies reporting higher than anticipated earnings are encouraging investors to accept more and more risk.

Clearly, globally markets are improving and it is becoming a matter of which country will recover the quickest. The Australian central bank was the first to raise benchmark interest rates but other countries will soon follow this lead. The Australian dollar strengthened to 92.93 US cents. The New Zealand dollar rose to 75.93 US cents.

The US dollar strengthened to 91.50 yen. The euro was at 137.73 yen per euro.

The Canadian dollar weakened to C$1.0474 much to the relief of the government. The Bank of Canada Governor is Mark Carney and he has publicly indicated that the bank could intervene in the currency market if the currency continued to rise.  A stronger Canadian dollar threatens the pace of the Canadian economic recovery.

One Canadian dollar will purchase 95.47 US cents. The central bank is not expected to be able to raise interest rate any time soon. The loonie or Canadian dollar has weakened by 1.8 percent over the last 3 days but it remains to be seen if this is to be an ongoing trend. The loonie has been rising against the US dollar as commodity prices rise including the price for a barrel of oil.  Oil is now at $81.24 per barrel. The Canadian export market relies on commodities like oil and gold for over half of its business.

Mexico’s policy makers have been trying to come to agreement as to the best plan for balancing the 2010 budget. A combination of tax increases and spending cuts had been approved but not everyone supported the plan. The country is at risk of another credit rating reduction if it is unable to come up with a strategy for reducing the  deficit.

The peso had been strengthening as the government comes closer to a deficit reducing plan. Yesterday the Mexican peso took a rest and was virtually unchanged at 12.9416 pesos per US dollar. Over the last month the peso has rallied 4.4 percent.

The Swedish krona weakened against the US dollar and the euro.  It fell to 6.9025 krona per US dollar and to 10.3229 krona per euro. The slide began after the central bank voted to keep the benchmark interest rate at its current level of .25 percent.  The bank also said the interest rate would remain unchanged until at least fall 2010.

The UK pound also weakened against the euro and US dollar.  Sterling was at $1.6578 against the US dollar and at 90.53 pence against the euro.  Surprisingly the September retail sales remained the same.  The weaker retail sales are affecting the pound and could force the Bank of England to continue its asset purchase plan or policy of quantitative easing.

There were rumors the South African government planned on freezing the currency.  The speculation weighed heavily on the rand and it fell to 7.5482 rand per US dollar. The rumor is unfounded but despite this the rand fell 1.8 percent yesterday.