Posted May 01, 2009
The New Zealand economy is being hard hit by falling tourism business due to the recession and now the H1N1 flu. The euro rose against the yen as Asian markets rise. China and the US indicate the recession may be easing in the respective countries.
Mexico has had to deal with what is now called the H1N1 flu (instead of swine flu). The virus has been impacting the peso for the last week and it is expected the Mexican economy is going to contract further due to the effect the flu is having on tourism and business revenues, especially in Mexico City with its 20 million residents. Mexico’s President Felipe Calderon asked businesses to close from 1-May to 5-May and that will hurt an economy already struggling with the recession.
The Mexican peso fell to 13.8407 pesos per US dollar.
But many other currencies posted gains against the dollar as signs appeared indicating the recession is beginning to ease. The Canadian dollar, for example, strengthened against the US dollar to 83.86 US cents due to investors believing the recession may be hitting bottom. Yesterday, the loonie hit the strongest value it has seen since 9-January-2009.
As the US GDP contraction seems to be slowing, investors are seeking higher yielding assets again. This is impacting a number of currencies and causing movement once again. It has been a fairly quiet week as investors took time to re-evaluate the condition of the financial sector.
The interesting fact is that the stock market is rising even as some countries indicate continued GDP contraction at levels higher than expected. For example, in New Zealand, falling tourism revenues are expected to hit the country hard. Professor Simon Mine, an Auckland University of Technology Professor of tourism, stated plainly that, “Things are getting worse…We are starting to see the initial impact (on the tourism industry). New Zealand is very dependent on tourism. It’s a major employer…”
The New Zealand dollar fell to 56.9374 US cents. The central bank has made it clear it expects interest rates to stay low for another eighteen months. The bank lowered the interest rate to 2.5 percent and that represents a 50 basis point cut. New Zealand was one of the first countries to see a recessionary contraction and it is expected to continue through the end of the year.
The euro put in a good performance against the yen yesterday. China has reported an increase in its manufacturing and that bodes well for the export/import market. The euro rose to 130.96 yen per euro. The rise was also due to the US Commerce Department report that US factory output fell at a slower rate. The euro fell though against the US dollar to $1.3258 US dollars per euro.
The US dollar rose against the yen as Chrysler files bankruptcy in the US. Chrysler auto company is expected to emerge from the bankruptcy in an alliance with Fiat SpA. The dollar rose to 98.87 yen per dollar.
The yen fell against most of the major global currencies.
In Australia, the Aussie strengthened against the US dollar to 72.68 US cents. This represents a nine-week advance. The advance is due to the signs the China and US economies are showing indications the recession can begin to turnaround soon.
The US dollar remained stable when paired with the pound and reported at $1.4776 US dollars. The South African rand continued its rise against the US dollar in response to a government interest rate reduction. The rate was cut to 8.5 percent and the rand strengthened to $8.4350 US dollars.
The South Korean won strengthened against the US dollar and Japanese won as the government adds more economic stimulus funding. The Korean won rose to 1,277.00 won per US dollar. It also strengthened to 12.9724 won per yen.