US Dollar & Yen Strengthen as US Retail Figures Show April Weakness

Posted May 13, 2009

April US retail sales figures show continued decline leading to a return of currency market volatility. The US dollar and yen strengthened as investors return to safe haven assets. The Russian ruble rose against the US dollar as the price of oil shows strength.


On Wednesday, 13-May-2009, the market volatility created by a recession sprung to life again.  Despite optimism the recession is easing, the global economies are a long way from even starting a full recovery.  “Easing” is not a recovery.

This fact became abundantly clear when the US reported retail sales fell again in April for the second consecutive month.  The US Commerce Department released disappointing numbers that show retail sales falling .4 percent in April despite hopes for signs the freefall was over.  The March retail sales had fallen 1.3 percent. It is presumed the rising unemployment is directly hitting consumer spending.

The US national jobless figures now stand at 8.9 percent as of April 2009.  Between the unemployment and falling retail sales figures, it was to be expected the markets would experience volatility.  The DJIA plummeted as investors took profits.  Subsequently, the US dollar and the yen rose once again as safe haven assets became appealing in light of the news the recession is going strong.

The dollar rose to $1.3585 against the euro.  The yen was the stronger currency when paired with the dollar and reached 95.74 yen per dollar.  This represents a .7 percent increase in the yen.

The euro weakened against the yen to 130.13 yen per euro.  This represented a fall in the euro against the yen for a third day.

As would be expected when investors seek safe haven, higher yielding asset investments decline.  The New Zealand dollar saw a significant weakening against the US dollar.  The kiwi weakened to 59.12 US cents. It also weakened against the Japanese yen to 56.69 yen per New Zealand dollar.   Also falling was the Norway krone with the currency losing 1.1 percent.  When paired with the US dollar, the krone fell to 6.5141 krone per dollar.

The Canadian dollar weakened to 85.26 US cents as US retail sales figures show continuing decline. 

In the UK, the pound fell to 89.77 pence per euro.  It also weakened against the US dollar to $1.5152.  Today the Bank of England reported it did not expect to see economic growth begin until 2010.  The  Bank of England Governor, Mervyn King, was quoted as saying, “The risks are weighted toward a relatively slow and protracted recovery.”

In addition, the central bank’s quarterly Inflation Report said that inflation could fall as low as .4 percent by the end of the year.  It is expected that the target 2 percent inflation rate will not be seen again until the year 2012.  Just as recently as Tuesday, the pound was showing strength in light of indications the economy was seeing some signs of recession easing. 

The Bank of England is considering increasing its quantitative easing program which will put additional pressure on sterling.  The BOE has made it clear that no one is yet in a position to predict the future of the recession.

If you will remember, there is still the matter of the toxic assets to deal with in the financial industry.  The US has implemented a public-private scheme to find toxic asset purchasers, but to date there have been very few takers. 

The Russian ruble strengthened as the price of a barrel of crude oil rose to $59.90.  Yesterday the price had finally reached over $60 again. The ruble rose to 31.9328 rubles per dollar, and it fell against the euro to 43.7503 rubles per euro.  The ruble rose against its current account reserve currency basket made up of US dollars and euros.