US Dollar and Yen Fall as Recession Eases

Posted September 06, 2009

The US dollar and the Japanese yen fell as investors responded to continued signs recession is easing. Canada reported job gains leading to currency gains. The euro rose strengthened as Germany’s factory orders continue to rise.


The US dollar fell over the weekend, as did the yen also, when paired with major global currencies.  The global economy continues to show signs of improvement in house sales, export orders, factory orders and credit markets.  Investor response is an increasing willingness to move funds into higher yielding assets.

The US dollar fell to $1.4332 against the euro.  The yen weakened to 133.54 yen per euro. The yen also fell to 63.94 yen per New Zealand dollar.  The US dollar advanced to 93.17 yen per dollar while falling against the South African rand to 7.5895 rand per dollar.  The greenback also fell against the Australian dollar to 85.19 US cents.

The euro’s climb is attributed to a private report by Bloomberg News that will indicate the confidence level of European investors is steadily rising.  It is now estimated to be minus 13.7 based on a survey of economists.  In addition, a German report will note that factory orders expanded in July by 2 percent making the fifth month of growth.  It would appear that Germany is going to pull out of the recession before many other nations.

The euro also rose against the British pound to 87.48 pence per euro.

Though recovery seems to be emerging in certain sectors, there is no certainty about the rate of recovery.  Markets are over-reacting to even small bits of good news but this recovery will take years to play out.  Making it even more difficult is the fact that no one can predict how it will unfold because this has been a unique recession.  As Shaun Osborne of TD Securities Inc. in Toronto, told Bloomberg, “From a recession point of view, we still have a long way to go.  Just look at the job losses.  It’s not like any recovery we saw since 1980.”

The Canadian dollar rose against to C$1.0824 against the US dollar.  This represents an intraday rally that has not been seen since 15-July-2009.  Canada had good employment news to report in that the number of jobs rose by 27,100 for August.  Additional joblessness had been predicted so the growth in employment was a true surprise.

It is interesting to note though that the increase in employment figures was largely due to the addition of part-time and not full-time jobs.  There was a net gain of 30,600 part-time jobs.

The US government is quickly having to address the issue of the withdrawal of stimulus  programs.  The government has been printing money to buy bonds and must now find ways to end the asset purchases without creating new economic problems.  It is not going to be easy which is why the G-20 has been addressing the issue also.  The G-20 leaders have generally agreed that it is still too early to exit stimulus programs.

In the US the unemployment figures showed that 216,000 jobs were lost in August which was lower than the 276,000 lost in July.  The country’s unemployment rate now stands at 9.7 percent compared to Canada’s 8.5 percent.

The US markets are closed on Monday, 7-September-2009, for a holiday