Mixed Bag of Currencies

Posted April 19, 2009

The currency market was quiet over the weekend, but there is a lot of economic data being issued this week which may restore volatility. The euro traded at its weakest level in a month as investors wait to see what the European Central Bank plans in the near future.


The currency market over the weekend was fairly quiet with analysts spending their time trying to guess what the various economic data announcements, expected in the coming week, will reveal about the state of the recession.  The economic data will report the first quarter 2009 results on many levels.

The expected reports will be coming in from around the world.   Hong Kong will report on the seasonally adjusted unemployment rate for the city.  The Thailand Ministry of Commerce will report on March exports. 

The Japanese Vice Finance Minister is speaking with reporters today.  The Bank of Japan is expected to report a higher than projected GDP contraction for the first 3 months of 2009.  Japan’s consumer prices are falling also.  Though fiscal stimulus has slowed the recession, it is clear it has only made a temporary dent.

In the US, some of the largest companies will report quarterly earnings for the first quarter of 2009.  These companies include a mixture of firms representing a variety of industries including financial, technical, and health.    The interesting point to note is that investors are expressing concern the happy reports from Wells Fargo and Goldman Sachs to date are not entirely accurate or realistic.  In other words, banks might be up to some of their old tricks of overstating assets or using accounting rules to influence the bottom line.

The US government will be reporting on US durable goods and US homes sales during the week.  These numbers will give an indication of whether the recession really has bottomed out.

The yen was at 99.23 yen per US dollar early Monday morning.  The Hong Kong dollar was at HK$7.7502 per US dollar.  The Thailand baht reported at 35.47 baht per US dollar.

The European Central Bank will probably cut its benchmark interest rate again by 25 basis points, according to ECB President Jean-Claude Trichet.  The uncertainty of the next bank action is dragging the euro down.  On Friday, the euro hit its lowest level in the last month when it reached $1.3017 when paired with the US dollar.

It is quite possible the ECB will institute a quantitative easing policy in order to slow the recession.  The euro has weakened due to uncertainty over the ECB policies but also because of bond redemptions in the Euro-Zone countries. 

In other currency news, the Swiss franc weakened against the US dollar to 1.1542 franc per dollar.  This is the fourth straight day of decline the franc has seen against the US dollar.  It held steady against the euro at 1.5115 franc per euro.

On the other hand, the Australian and New Zealand dollar strengthened against the US dollar and the yen.  The reason for the rise is investor optimism the recession is easing.  The Aussie rose to 72.30 US cents and to 71.75 yen.  The New Zealand dollar rose to 56.95 US cents and to 56.94 yen.

Asian currencies gained overall last week for the same reason the Aussie and kiwi gained.  There is increasing belief the recession is poised to turn around.  The Indonesian rupiah ended the week at 10,738 rupiah per US dollar.  The South Korean won strengthened to 1,331.55 won per US dollar which represents an increase for a sixth week in a row. 

Also rising against the US dollar was the Indian rupee which reached 49.767 rupee per dollar. 

The mixed currency news is simply a sign that the recession has everyone still wary and still confused about the right course of action to take in the markets.