Swiss Franc and Yen Weaken in Volatile Currency Market

Posted June 18, 2009

The yen weakened as investors gain more confidence the recession is easing. But despite the confidence there is also concern the economic indicators are not giving an accurate picture of the status of the recession. The pound fell against the US dollar and the euro as May retail sales fell.


The yen fell as investors moved their money into assets with higher yields.  With the recession easing on many fronts, it is not surprising that the yen would weaken against most major global currencies.  The yen weakened against the euro (134.54 yen per euro); the US dollar (96.63 yen per dollar); and the New Zealand dollar (61.86 yen per dollar). 

The yen also weakened against the Australian dollar to 77.53 yen per dollar.  The New Zealand and Australian dollars strengthened as Asian equities began to climb.

The US economic news is actually mixed.  June homebuilder confidence fell.  Also falling was the May industrial production.  The number of people on unemployment fell, but some analysts indicate this is because the claimants moved to the extended benefits category which is not included in the joblessness number.

But the index of leading economic indicators rose for the month of May in the US.  There is a lot of concern that the recession is still entrenched and market activity has been fairly irrational.  The rise in stocks over the last 2 months may have been too much and too fast based on actual economic data.

The US dollar strengthened against the UK pound to $1.6375 pence per dollar.  The pound fell against the euro to 85.34 pence per euro.  The decline was a response to the news that UK retail sales fell in May.

There is speculation the Swiss government will enter the currency market to slow the franc’s advance.  The franc weakened against the UK pound to 1.7735 francs per pence.  The franc held against the euro at 1.5100 francs per euro.  The Swiss central bank met and decided to keep interest rates at their current level. 

The currency market has been fairly quiet this week as investors evaluate economic conditions.  The mixed economic news is creating concern the recession is not truly finding bottom yet. 

Canada’s dollar did not see much change on Thursday, 18-June-2009, even though oil prices rose.  The loonie strengthened a bit to 88.31 US cents. 

The Mexican peso strengthened to 13.3904 pesos per US dollar.  The rise was attributed to the increase in the May economic index as reported by the Federal Reserve Bank of Philadelphia in the US.  The index rise was interpreted as a sign the US economy contraction is easing. 

Since the US accounts for up to 80 percent of Mexico’s exports, any positive signs are good for the Mexican peso.   Banco de Mexico sold US$50 million at auction on Thursday in order to purchase pesos.

The Chile peso strengthened to 538.02 pesos per US dollars.  This represents the strongest level the peso has seen in 9 months.  The peso rose in anticipation of the planned government sale of $40 million a day in the Forex market for the purpose of repatriating its international assets. 

The Columbia peso fell against the US dollar to 2,090.31 pesos per US dollar.   This was the fourth day of decline.

The British Bankers’ Association has announced it is considering an expansion in the number of banks participating in the setting of the Libor rates.  The Libor is the overnight lending rate between banks.  By adding more banks the rate will be less volatile and less subject to manipulation.