US Dollar Rises as Investors Seek Currency Safety

Posted April 15, 2009

The US dollar strengthened against most major global currencies as investors sought investment safety again. The UK pound broke the $1.50 range against the US dollar for the first time in over three month.


The US dollar began to strengthen against most major global currencies on 15-April-2009.  The reason is that investors are seeking investment safety again as the US industrial production figures show a March decline of 1.5%.

The US dollar strengthened to $1.3205 US dollars per euro.  The US greenback also strengthened against the Japanese yen to 99.10 yen per US dollar; rose against the Norwegian kroner to 6.7192 kroner per US dollar; and against as the Swedish kroner to 8.2805 kroner per dollar.

This is the interesting fact about this recession: one day economic news looks grim and the next day there are signs some areas are improving.  This is true around the world too.  For example, China reported a 6.1% GDP expansion for the first quarter of 2009 which is a number other countries wish they could report.  Yet this is the lowest growth percentage China has reported in ten years.

Does that make it good or bad news?

The Australian and New Zealand dollars responded negatively to the Chinese GDP report.  Both dollars weakened on fears the slowing Chinese economy will lead to lower commodity exports.  The Australian dollar fell to 72.63 US cents and the New Zealand dollar fell to 57.64 cents.

Canada’s dollar saw significant gains yesterday.  The loonie strengthened to C$1.2014 per US dollar.  The Bank of Canada is considering instituting a policy of quantitative easing but investors are not convinced this will actually happen.

The big news in the currency market was the strengthening of the UK pound to a level above $1.50 when paired with the US dollar.  This is the first time this has occurred since January 2009.  In fact, the pound rose against the yen to 148.95 yen and against the euro to 87.90 pence.

This is another example of the good news-bad news situation mentioned earlier.  The UK is in the worst recession it has seen in almost twenty years and one day the news is grim concerning manufacturing output and consumer spending.  Then a report comes out, like the one yesterday, showing new mortgage approvals rose in February and housing prices are not falling as fast or as deep as they have been over the last few months.

The Euro-Zone is not so fortunate.  The news coming from the Euro-Zone continues to show a deepening recession.  That is why the euro is weakening against major global currencies.  The euro weakened to 130.81 yen per euro.

The Mexico peso strengthened against the US dollar more than it has in a week.  The central bank is expected to lower its benchmark interest rate on Friday to 6.25 percent.  This would represent a cut of ½ percent and would promote growth.

The Mexico peso rose to 13.1610 pesos per US dollar.

Also strengthening against the US dollar are the South Korean won (1,320.10 won per dollar) and the Malaysia ringgit (3.5912 ringgit per dollar).  Both currencies rose on signs the global recession may be hitting bottom finally.

Today was “tax day” in the US.  All taxpayers are supposed to file their returns for 2008 by today or ask for an extension.  There were many middle class protests around the country to make the point the US debt is too high and the tax burden unreasonable.  President Obama went on television again to justify his spending plans.  The rapidly growing US debt is a looming problem that will take center stage once the recession ends.

The currency market was very quiet yesterday. Volatility still exists, but markets are beginning to respond to economic news with less fear.