Posted February 04, 2010
The US dollar strengthened against the euro as the US economy continues to improve. The New Zealand dollar fell against the US dollar as the nation’s unemployment rate rises. There remains weakness in the euro as member nations struggle with massive budget deficits and debt. The Canadian dollar weakened against the US dollar. Latin American currencies reported mixed news against the US dollar. The Norwegian krone weakened against the euro.
The US dollar strengthened against the euro as economists project that the U.S. added jobs in January. This raises hope the economy is on a path for picking up the pace of recovery.
In more mixed recovery news though, the US service industries did not expand as much as projected during January. The Institute for Supply Management reported that the index rose to 50.5 in December. Though this is in positive range, it is less than forecast.
The continued high unemployment in the US is restraining economic growth. The US unemployment rate is hovering around 10 percent and until consumers begin spending a full recovery is not possible. The economy grew at a fast clip in the fourth quarter of 2009 at 5.7 percent but some of the growth was due to the annual inventory stocking by firms after the end of the year.
The US dollar rose to $1.3894 when paired with the euro. The dollar mostly held against the yen to 90.98 yen.
The New Zealand dollar economy is not faring as well as the jobless rate surged once again. The kiwi traded at 69.88 US cents. The New Zealand unemployment rate stands at 7.3 percent for the fourth quarter of 2009.
The euro is also suffering due to debt problems in member nations. The euro was at 126.37 yen per euro. In the European Union, problems with Portugal, Greece, and Spain are testing the ability of the European Commission to enforce member nation debt rules. Though countries are not expected to balance government budgets within one year, they are expected to have a plan in place that will make significant progress towards reducing budget deficits and debt.
The European Central Bank will vote to keep the benchmark interest rate at 1 percent at its meeting this week.
The Canadian currency weakened against the US dollar to C$1.0622. The price of crude oil is currently fluctuating casting uncertainty into the commodity based currency values. There are risks remaining that stock prices could continue to fall which will also drag on the loonie.
Oil prices for March delivery are at $76.85 per barrel.
The Chilean peso fell against the US dollar more than it has since last October. The government changed currency rules last week and the full impact of those rule changes is yet to be felt. The peso fell by a full 2 percent against the US dollar and reached 537.88 pesos per US dollar.
The pension fund changes involve government limits on currency hedges for foreign investments to a maximum of 50 percent if the investment meets certain conditions. The peso fell as on concern investors would begin selling the peso in response to the new rules.
The peso has not fallen as much as anticipated and could recover some of its losses.
In other Latin American countries the currency news was mixed. The Columbian peso fell to 1,968.3 against the US dollar. The Argentinean peso remained stable at 3.8328 pesos per US dollar. The Venezuelan bolivar weakened to 6.3 bolivars per US dollar. The Peruvian sol also remained stable against the US dollar at 2.8513 sols.
Norway’s krone weakened against the euro to 8.1626 krone per euro. The central bank kept the benchmark interest rate at 1.75 percent. Norway has concerns a strong krone could hamper economic recovery. Future interest rate increases remain uncertain right now.
The Swedish krona was at 8.1626 when paired with the euro.