Posted September 16, 2009
The US dollar is weakening against the euro as investors seek higher yielding assets. Stock markets around the world continue to rise leading to dollar sell-offs. The UK pound fell against the euro as UK unemployment rates continue to rise. Venezuela and Israel are intervening in the markets to prop up their respective sagging currencies.
The US dollar is headed downward against the euro and the Dollar Index as the stock markets continue to move upward. Though the recovery will take many months, you can almost feel the jubilation in embattled markets even if it’s temporary. For the first time the analysts are daring to predict the Dow Jones Industrial Average is going to continue an upward climb to somewhere over 11,000 and several have said as high as 14,000.
Currently the DJIA is at 9,791.71 which is this year’s high. The NIKKEI is at 10,270.77. The FTSE is at 5,124.13. What does this portend for the currency markets? One of the major reasons the dollar is headed downward when paired with major global currencies is because investors are abandoning the greenback for more lucrative investments. In fact they are also abandoning the Japanese yen as higher yields are sought.
The US dollar fell against the euro to $1.4731 and the Dollar Index to 76.151 which is a 12-month low. The Japanese yen rose to a 7-month high when paired with the US dollar at 90.10 yen. As the US economy begins to revive, domestic and foreign investors are willing to seek riskier assets leading to downward pressure on the dollar and the sale of Treasuries.
The yen ended the day New York time at 133.70 yen per euro.
As commodity prices rise, the Australian and New Zealand dollars are also rising. The Aussie rose to $.8746 and the New Zealand dollar rose to $.7142 when paired with the US dollar. Investors are attracted to Australian and New Zealand investments because interest rates remain at 3 percent and 2.5 percent respectively compared the paltry US zero to .25 percent rates.
In the UK the new numbers showing increasing joblessness rates led to a weakening of sterling against the euro. The number of people on unemployment rose to 2.47 million as of July 2009 meaning the overall rate is 7.9 percent. This number led to another knee-jerk reaction in the marketplace causing the pound to drop to 89.31 against the euro in intra-day trading which is a 4-month low. The British currency recovered by the end of the day to 89.01 pence per euro.
The pound strengthened against the US dollar to $1.6508.
The Venezuelan bolivar strengthened to 5.68 bolivars against the US dollar as the government. Since it is unregulated trading, it is not known for certain what actions the government is taking to strengthen the bolivar. Speculation is the government is buying bonds in the international market and then selling them in the local market to raise bolivars.
As oil prices for October delivery rose to $72.36 a barrel, the Canadian dollar reached C$1.0655 against the US dollar. That means one Canadian dollar will buy 93.86 US cents.
The Hungarian forint rose to 270.08 forints per euro. The Hungarian stock market BUX Index increased by 3.2 percent to 20,040.50. This reflects investor desires for cheap stocks and a willingness to take on some risk in undervalued markets. The rising global commodity prices played an important role also as the stock prices for the largest refinery in the country rose by 4.9 percent in a single day.
The Israeli shekel fell to 3.7775 shekels per US dollar as the central Bank of Israel purchased US dollars in purposeful currency market intervention.