US dollar Slides Downward

Posted December 24, 2009

The US dollar fell against the yen and the euro on the belief the Federal Reserve will not make any moves soon to withdraw stimulus programs. The Canadian dollar continues to appreciate as the nation’s pace of economic recovery quickens. The Argentina peso rose to a 6-month high against the US dollar. Latin American currencies showed mixed results. The Russian ruble appreciated as oil prices climb.


The US dollar fell against the yen and the euro on the belief the US Federal Reserve will not change monetary policy in the near future. There had been some speculation the central banking authority would begin making plans for the withdrawal of stimulus programs but the economic recovery remains too weak.

In surprising numbers the US business activity report is expected to show a decline even as new homes sales fall in November. The dollar fell to $14358 against the euro. It also fell to 91.22 yen per dollar.  The euro weakened to 130.9 yen per euro.

In November the US new home sales fell by 11 percent which is a surprisingly large numbers. The forecast by the government had been there would be an increase due mostly to government programs giving consumers tax deductions. But the high unemployment rate of 10 percent is slowing economic recovery and until it is brought down a full normalization of economic activity is not possible.

So as long as the numbers look so grim the US Federal Reserve is unlikely to make any changes to interest rates or stimulus programs.

The Canadian dollar has been rising and has now reached a 3-week high against the US dollar. Canada’s economic recovery is quickening and the central bank is expected to raise interest rates sooner rather than later. The Canadian dollar was at C$1.0490 which means one Canadian dollar will purchase 95.33 US cents.

Canada’s dollar has been appreciating against most major global currencies as the economic activity inches upward. The next meeting of the central bank is in January. Canada’s currency will probably continue to appreciate as investors search for higher yielding assets.

The Argentina peso rose to a 6-month high against the US dollar. The reason for the increase is a belief major state-run agencies are repatriating foreign investments.

In other Latin American countries the currency news was mixed. The Columbian peso rose to 2,050.48 pesos per US dollar on rising oil prices. The Chile peso fell to 507.89 pesos per US dollar. Peru’s sol remained stable at 2.8835 when paired with the US dollar.

The Russian ruble continued to climb and reached a week high against the US dollar. As oil prices increase – so does the ruble. The ruble was at 30.2050 rubles per US dollar. It also rose against the euro to 43.1363 rubles per euro.

Oil has reached $75.46 per barrel which provides support for the ruble. The ruble reached 36.0587 against the currency basket of dollars and rubles. This is well within the band the government targets of 26 to 41.

The Romanian leu appreciated also to 4.1915 against the euro as the nation gets a new Prime Minister. The new government is expected to immediately deal with the national budget and debt and commitments made to the International Monetary Fund.  Romania has loan payment coming due and the money cannot be released until a budget is passed.

The Christmas holiday is tomorrow and most global markets will be closed.