Global Currencies Strengthen Against US Dollar

Posted October 14, 2009

The US dollar is still weakening as the global recovery continues to spread around the world. The Canadian dollar rose against the US dollar. The Brazil real continues to strengthen as commodity prices increase.


The US Dow Jones Industrial Average broke 10,000 for the first time in a year yesterday even as the US dollar continues to weaken against the euro and most other major global currencies.  As mentioned on Monday, large corporate earnings reports were set to be released today and in many cases the news was positive.

The greenback fell to $1.4920 when paired with the euro towards the end of the Wall Street market day. The dollar also weakened against the yen with the yen coming in at 89.41 yen per dollar.  US retail sales, including car sales, for September were lower than expected which put further pressure on the dollar. When car sales are removed the retail sales actually increase compared to a decrease in the prior month.

The dollar is being sold as investors interpret recent Federal Reserve meeting minutes as an indication US interest rates will remain low. Dollar weakness is expected to continue.  Investors were quick to respond by buying higher yielding assets.  The Federal Reserve minutes proved some members were willing to increase the mortgage backed securities purchase program and do not expect to raise interest rates any time soon.

Interest rates vary widely from country to country with the US having the lowest rate at zero percent to .25 percent.  Japan’s rate is also still low at .1 percent.  But Brazil offers an 8.75 percent interest rate.  South Africa’s rate is still at 7 percent. Hungary’s rate is at 7.5 percent.

The Canadian dollar continues to climb against the US dollar to C$1.0253 as oil and gold prices climbed over the past several days.  Oil rose to over $75 a barrel at one point before falling to $74.63 a barrel. Canada’s dollar, named the loonie, reached a 14-month high yesterday when paired with the US dollar.

Like Canada, Norway relies on oil for its major export commodity and the rise in oil prices led to a stronger krone.  The Norwegian krone rose to 5.5434 krone per US dollar. The krone was the currency strengthening the most against the US dollar yesterday.

Of course, as commodity prices increase so goes the Brazilian real.  The real strengthened to 1.7048 real per US dollar. The real has strengthened by a whopping 36 percent this against the US dollar. Brazil’s economy is expanding and over a quarter of a million new jobs were created in September 2009.

The entire Latin American region is expected to expand by 3.3 percent in 2010.

As Chinese exports slowed, the Hungarian forint strengthened against the US dollar to 267.50 forint. The forint is strengthening as investors turn to emerging markets to earn higher profits. 

Also strengthening is the Czechoslovakia koruna.  The koruna rose to 25.878 koruna per euro.

It will be interesting to watch the currency markets respond to the weakening dollar.  Concerns about the fall of the US dollar were first brought to global attention by the Chinese who invest heavily in the US.  The Chinese are the largest foreign purchasers of US Treasuries.

The Australian dollar rose again against the US dollar to 91.83 US cents per Aussie.  The central bank has indicated that interest rates will be moving to normal.  Australia was the first country to raise its benchmark interest rates as the nation clearly enters economic recovery.