Posted January 26, 2010
The Japanese yen fell against the US dollar and the euro. The US dollar fell against the euro but the euro is headed for a monthly loss. The UK pound strengthened against the US dollar as analysts predict a return to UK GDP growth. The Canadian dollar and the Russian ruble fell against the US dollar on falling oil price. Argentina’s peso is expected to end a long rally against the US dollar.
The yen has fallen against the US dollar as US President Barack Obama gets enough votes in Congress to reappoint Federal Reserve Chairman Ben Bernanke for a second term. Bernanke has been criticized for being one of the architects of the recession by failing to use regulatory and investigative powers to stop the risky behavior of banks.
Recently Obama recommended limiting the ability of banks to invest in hedge funds and this was soundly approved by conservatives in the United Kingdom in addition to the US liberal Democrats.
The yen slid to 90.51 yen per US dollar as the US clearly works toward stabilizing the economic recovery. Though progress has been made in the US and globally, recovery continues to ebb and flow. It also now appears that US interest rates will remain at their current historic lows at near zero past June 2010. With unemployment still rising and few signs of inflation, there is no hurry to tighten monetary policies.
The yen also fell against the euro to 128.28 yen per euro.
The euro is expected to continue its downward trend according to technical charts used by analysts to project currency movements. Though the US dollar weakened against the euro yesterday to $1.4176, the euro is expected to fall again this week. Overall, in the month of January, it appears the euro will have a monthly loss against the US dollar for the second straight month.
The UK pound strengthened against the US dollar and the euro on the expectation the 4th quarter 2009 GDP reports will show a return to growth. UK house prices continue to rise also. But the concern for the pound’s strength centers on the 2010 election. The growing budget deficit is expected to be a point of contention in the new Parliament and discussions could stalemate.
In fact the analysts have cut forecasts on the pound’s strength over concerns the UK government will not be able to successfully manage the budget deficit and begin bringing it down. An austerity budget will not be well received after a long period during which consumers have already suffered.
The pound strengthened to $1.6265 against the US dollar and to 87.15 pence per euro.
Interestingly US President Obama has suggested a budget freeze on all non-security budget components in a show of fiscal responsibility. Even if put in place the freeze excludes the majority of the federal government spending including defense and social programs Medicare and Social Security.
Canada’s dollar weakened to C$1.0576 when paired with the US dollar. One Canadian dollar will purchase 94.55 US cents. The fall was linked to crude oil price declines to $75.27 per barrel for March future delivery.
The Australian dollar strengthened against the US dollar to 90.81 US cents. Australia offers higher yielding assets with its 3.75 percent interest rate while also offering a high degree of security among South Pacific nations and its Asian trading partners.