Mixing It Up

Posted April 01, 2009

The day before the G-20 conference started, the currency news was mixed with the euro reaching its lowest two week level against the US dollar and a host of other currencies. The yen rose on the news the Japanese government is going to take aggressive steps to jumpstart their economy.


Members of the G-20 began assembling in London today on 1-April-2009, and yesterday the currency news was mixed.  As US President Barack Obama winged his way to London, European and Asian countries were busy implementing a new round of stimulus packages and inter-country agreements in an attempt to jumpstart the economies. 

Japan, is one of the countries which reported a new stimulus package is in the works.  The unemployment in the country jumped to a new three year high reaching 4.4%.  But signs of government action led to the strengthening of the yen against the US dollar, Swiss franc, and UK pound.

The yen climbed to 98.53 yen per US dollar; strengthened to 1.1425 yen per Swiss francs; and it also climbed to $1.4281 when paired with the UK pound.

The euro weakened to a new two-week low against the US dollar as the Euro-Zone economy continues to slide.  The most recent news was the increase in the German unemployment rate to 8.1%.  In addition, the European Union inflation rate is dropping which is fuelling fears conditions are being primed for deflationary conditions.

The euro weakened against the US dollar to $1.3205.  It also fell against the yen to 130.15 yen per euro.  In fact, when pairing the euro against each of the 16 major currencies, it weakened.  The European Central Bank is expected to lower borrowing costs over the next few months in a continued effort to turn the recessionary pressures around.

By the way, crude oil is still hovering around the $50 per barrel rate and was at $49.90 at the end of the New York trading session.

Australian and New Zealand dollars succumbed to poor economic news once again.   February retail sales in Australia fell by 2%.

With the news General Motors and Chrysler auto companies in the US might have to file bankruptcy, the dollars of both countries weakened against the greenback.  The Aussie dollar fell to 68.82 US cents, while the New Zealand dollar fell to 55.62 US cents.  It is possible the New Zealand central bank is considering another benchmark interest rate reduction.

Asian currencies weakened against the US dollar as demand for the assets of emerging markets fell.  With the US, Japan, and China stills struggling to deal with declining exports, the rapid fall in auto sales, the still shaky financial institutions, falling house prices, toxic assets, and weakening consumer confidence, it is not surprising investors are turning back to safe haven assets. 

The Indonesia weakened to 11,620 rupiah per US dollar.  The Singapore dollar also fell to S$1.5231 when paired with the greenback. The South Korean won fell to 1,388.75 won per US dollar.

The World Bank, the Asian Bank, and the Organization for Economic Cooperation and Development all reduced GDP growth estimates for Asia which put pressure on the emerging market currencies.

Mexico has asked the International Monetary Fund for a credit line.  This may strengthen the Mexican peso.  The peso rose to 14.1722 pesos per US dollar which extended a 3 week rally.

So the news in the currency world was quite mixed yesterday.  There are concerns the G-20 leaders will not be able to come to agreement and each country will individually address the recession.  President Obama believes the recession will end much sooner if there is a coordinated government stimulus plan.  But many of the G-20 countries have no interest in assuming more debt at this point.  They are backed by protestors around the world who believe quantitative easing policies and debt are setting the economies up for a long term problem.