US Currency Weakens On Long Recovery

Posted September 03, 2009

The US dollar fell against most major global currencies on speculation the nation’s joblessness rose yet again in August. A meeting of the G-20 is discussing how to eventually unwind government stimulus programs and tie banking official bonuses to a reasonable measurement factor. The euro fell against the yen and pound.


The US dollar fell close to its lowest yearly level against the Swiss franc.  The dollar weakened to 1.0605 francs per dollar yesterday and had fallen to a 30-December-2008 low of 1.0531 francs on 27-August-2009.  Yesterday’s weakening was in response to speculation that US unemployment rose once again last month meaning US interest rates will continue to be held at near zero.  This drives investors to seek higher yielding but safe markets.

The US dollar fell against the euro to US$1.4276 and against the yen to 92.26 yen.  The US economy has shown signs it is attempting to improve but recovery is going to be quite slow.  The US dollar fell against most major global currencies on speculation the new unemployment reports will show joblessness in the US increased to 9.5 percent in August.  The US is still on track to exceed 10 percent unemployment by the end of the year.

But US Treasury Secretary Timothy Geithner gave a speech to the G-20 and said that economic growth is appearing in some sectors and the stimulus policies of the countries played a big role in getting recovery to its current state.  The message was clear though that full recovery is a very long way off meaning it is not yet time to unwind government stimulus programs.

Geithner is also attempting to convince the G-20 policy makers that there is a need for a coordinated global unwinding program that will also include addressing financial industry capital requirements.  One point most of the G-20 seems to agree on is the fact that bonuses for bank officials should be limited and should be realistically tied to revenues or some other success indicator.

The euro weakened to 131.70 yen and to 87.77 pence.  The Euro Zone is struggling to maintain a recovery track like the rest of the world.  Economists are saying a European report might show July retail sales actually declined again when compared to July 2008.

The Euro Zone GDP contracted by .1 percent in the second quarter of 2009.  The European Central Bank is expected to maintain benchmark interest rates at 1 percent.  The area’s unemployment rate currently sits at 9.5 percent for July which is the highest it has been since 1999.

The Japanese benchmark interest rate is at a record low of .1 percent whereas the interest rate in Australia is 3 percent.  New Zealand also has a higher interest rate after being held at 2.5 percent by the central bank.

The Japanese yen rose to a high against the US dollar not seen in 7 weeks after investors sold off the US dollar on the expectation US unemployment reports will show another increase.  The US dollar weakened to 91.94 yen per dollar.

The currency market was very quiet yesterday as investors wait for new economic reports to be issued.  Economists have been predicting US dollar weakening would occur as the global economies began to show improvement.  That is exactly what is happening.

The problem countries like the US and the UK now have is putting a stop to the burgeoning national debt.  The US recently reported the federal deficit is currently at $1.6 trillion and it will grow to $9 trillion within 10 years if current spending continues.  Every dollar of deficit is a dollar that must be borrowed.