New Japanese Finance Minister Likely to Support Weak Yen

Posted January 06, 2010

The Japanese yen fell against most currencies as US-Japan debt yield widens. The Mexican peso strengthened against the US dollar on the hope exports to the US will soon increase. The Australian and Canadian dollars appreciated against the US dollar as metal and oil prices rise. The Swiss franc strengthened against the euro.


The yen rose yesterday against the US dollar to 91.71 yen and then fell early this morning to 92.64 yen against the US dollar. The dollar strengthened for the first time in three days as the difference in the yield between the US and Japanese debt widened on 2-year Treasury notes to .87 percent.

The yen fell against the euro today also to 133.19 yen after ending the day yesterday, New York time, at 131.75 yen. Japan has a new finance minister, Deputy Premier Naoto Kan, and no one is quite sure what his plans are too boost economic recovery. It is expected he will support a weak-yen policy at this point.

The Mexican peso also appreciated against the yen to 7.26 yen.

The US is prepared to issue labor reports today. The hope is that contraction of nonfarm payroll jobs is very close to ending.  The US non-manufacturing index issued by the Institute for Supply Management has been raised to 53.7 percent for December which is a marked improvement and indicates growth is occurring.  The non-manufacturing sector of the US economy accounts for 90 percent of the economy.

The Australian dollar advanced to 91.63 US cents as commodity prices in metals rally.

The Canadian dollar also strengthened on metal prices to C$1.0353 against the US dollar. One Canadian dollar will purchase 96.67 US cents. The loonie is expected to reach parity against the greenback some time in 2010.

The prices of gold and copper climbed while oil increased to $82.47 a barrel for February delivery. The loonie has now gained for 5 straight days. Gold is at US$1,135.27 per ounce and copper prices have reached $3.50 a pound.

The Canadian economy is on the mend after the GDP resumed growth in the third quarter of 2009. The country’s employers are forecasted to have added 20,000 jobs in December. The Bank of Canada will review its benchmark interest rate on 19-January-2010 but is not expected to make any changes this early. The current interest rate is at .25 percent and is likely to be kept at its historic low until June of this year.

The Mexican peso rose against the US dollar to 12.7811 pesos. The peso is strengthening as the US economy shows signs of improving. Mexico relies on the US for 80 percent of its exports. As the US economy grows stronger it is expected to have a positive impact on the Mexican economy also. The peso is considered to be undervalued at this point and will probably continue strengthening.

The Swiss franc has risen to 1.4809 francs per euro. The Swiss central bank is prepared to intervene in the currency market if the franc were to appreciate too quickly.

Greece’s debt and deficit is under review by the European Union. Though Greece’s prime minister has vowed to make progress towards debt reduction in a move to meet euro member requirements, the fear is default is around the corner. If Greece defaults on its debt there is a concern other countries will be dragged alone including Spain and Ireland. Spain has already had its debt rating cut due to its staggering amount of debt.

Clearly the global economic recovery is in progress but remains generally weak.