US Currency Weakens as Recession Continues Easing

Posted June 08, 2009

The US dollar weakened as the recession continues to ease. The UK pound is experiencing volatility due to the political conditions in the country. The Swedish krona weakened as its ability to collect Baltic State loans comes into question after failed Latvia auction.


The US dollar weakened against the euro and the pound as the UK seems to be finally experiencing some stabilisation of the housing market.  The UK government has been under intense scrutiny by its opposition and the Labour party lost by a wide margin in the European Union parliamentary elections just held.  It remains to be seen whether Prime Minister Gordon Brown will survive the challenges to his office.

With the long awaited stabilisation of the UK housing market, investors gained even more confidence the recession is going to continue to ease and even begin to turn around by the end of the year.  This will most likely lead to downward pressure on the low yielding yen and US dollar.

The US dollar weakened to $1.3923 dollars per euro and to $1.6078 dollars per pound.  The US dollar also weakened against the yen to 98.51 yen per dollar.  It is quite possible the US will begin to increase interest rates once again before the end of the year.

The UK central bank, the Bank of England, is considering an expansion of its quantitative easing policies.  The problems facing Gordon Brown are impacting the UK pound and many believe he should resign for the good of the economy.  The pound weakened to 157.82 yen while strengthening against the euro to 86.75 pence per euro.

Latvia has been in the news the last week as the country deals with a failed securities auction.  Sweden’s krona weakened significantly against the euro due to its exposure to potential problems with Latvia and other Baltic region loans held by the Swedish financial system.  Sweden currently holds $75 billion in Baltic State loans.  This is per the Bank for International Settlements

The Latvia central bank is currently defending its currency, the lats, by spending 168 million lati to date.  The lati is pegged to the euro with an allowed 1 percent band, and Latvia hopes to one day adopt the common currency. 

The Swedish krona weakened to 10.8479 krona per euro.  The Norwegian krone, on the other hand, weakened against the US dollar as the price of oil fell for the second straight day to $68.03.  The krone fell to 6.4376 krone per dollar.

The Mexican peso weakened against the US dollar to 13.4531 pesos per dollar.  The peso’s fall was attributed to an increase in US Treasury yields which reduced interest in investing in emerging-market securities.  Mexico has experienced high rates of losses in remittances and tourism revenues which are the two mainstays of the Mexican economy.  The largest source of dollar flows into the country is oil exports.

The Canadian dollar strengthened to C$1.1157 against the US dollar or 89.63 US cents.  The country’s finance minister, Jim Flaherty, believes the recession may be ready to turnaround and he plans on Canada being one of the first economies to improve.  The increase in the price of oil plays favourably with Canada’s economy.

The Columbian peso weakened to 2,091.80 pesos per dollar.  The fall is attributed to speculation the US will be increasing interest rates as Columbia lowers its rates.  This is making the peso appear to be overvalued and a price adjustment is occurring.

Australia’s dollar strengthened to 79.18 US cents as the May business confidence sentiment index rose to minus 2.  This was a 12 point increase.  The Australian government plans on spending billions of dollars on its infrastructure and the spending will serve to stimulate the economy.