Investors Selling Off US Currency

Posted September 11, 2009

Investors around the world are selling off the US currency as signs of economic recovery grow stronger each week. The US dollar is dropping while the UK pound and euro strengthened significantly. The Canadian dollar also strengthened as oil prices continue to rise. Mexico’s peso rose though it will not hold at this level if the government is unable to balance the 2010 budget.


The US dollar is weakening as investors sell off the US currency in favour of more profitable yields.  Stock markets are beginning to trend upward again with small setbacks periodically.  The UK pound and euro are strengthening even as the US dollar declines.

The Dollar Index has weakened for six straight days which has not happened since March.  The Dollar Index tracks the US dollar against a basket of major currencies.   The basket is made up of six currencies which are the yen, pound, euro, Canadian dollar, Swiss franc, and the Swedish krona.  The index has fallen to 76.497 against the US dollar.

In addition, the UK pound has risen to a monthly high when paired with the US dollar as the nation’s producer prices rose for the 6th straight month as of August.  The US dollar fell to $1.6742 against sterling.  The UK prices rose .2 percent in August when compared to July.  The Bank of England voted against expanding the quantitative easing program in the first real signal the country believes the recovery is finally taking a firm hold.

The US dollar also fell against the euro to $1.4582 and against the Japanese yen to 90.57 yen.  The yen is benefitting from the economic news coming out of China indicating China’s domestic spending is increasing and will lead to a growth in exports to other Asian nations.  Such an event would lead to the repatriation of the yen by Japanese exporters and by investors who desire to take advantage of new tax laws promoting domestic economic activity.  China saw a 12.3 percent increase in manufacturing in August when compared to August 2008.

The yen strengthened against the euro to 132.30 yen.  The new law will waive some taxes on profits reflecting repatriated funds.

The Canadian dollar strengthened against the US dollar as oil prices continue to rise.  The oil barrel price for October delivery has risen to $72.03 boding well for Canada’s export revenues.  The loonie rose to C$1.0721 against the US dollar or to 93.27 US cents.

The central bank of Canada voted yesterday to keep the .25 percent benchmark interest rate unchanged.

After hitting a one year high against the US dollar this week, the Brazil real began to fall.  At one point it was believed the Brazil economy would see the most rapid expansion among emerging market countries, but that outlook is changing.  The real has strengthened the most against the US currency this year among Latin American countries.

Concerns that economic recovery will be slower than anticipated led to a .6 percent decline in the Brazil real to 1.8035 real per dollar.  Though recovery may be slower than hoped, the Brazilian economy is one of the few to have emerged from the recent recession.  During the second quarter of 2009 the GDP expanded by 1.9 percent compared to the first quarter.

The Mexican peso recovered some of its losses against the US dollar as investors seek higher returns.  The peso strengthened to 13.3528 pesos per US dollar.  Mexico continues to struggle with balancing its 2010 budget.