US Dollar Weakens As Recovery Chugs Along

Posted November 25, 2009

The U.S. dollar weakened as signs of economic recovery continue to appear. The Australian dollar rose as economy improves. Mexico’s peso strengthened after Fitch downgraded the foreign debt rating to BBB. The Canadian currency weakened against the U.S. dollar as oil prices feel.


The U.S. dollar weakened as the global economic recovery chugs along slowly. The greenback fell against most global currencies including the euro, Japanese yen, and Australian dollar.

In Japan the export numbers show they are falling at a decreasing rate. China’s demand for imports has been rising to the benefit of Japan and many emerging markets. The U.S. dollar was at 88.32 yen per dollar. The dollar fell against the euro to $1.4988.

The U.S. dollar has weakened by 7 percent against the yen in just the last 90 days.

The Australian dollar benefitted from statements made by Ric Battellino who is the Deputy Governor of the Reserve Bank of Australia. He said the Australian economy is entering a period of upswing meaning the bank might raise benchmark interest rates again. The Aussie rose to 92.51 U.S. cents. The current Australian interest rate is at 3.5 percent.

The New Zealand dollar also rose against the greenback to 72.82 U.S. cents. New Zealand’s interest rate is currently at 2.5 percent.

The U.S. economy is one of the slowest recovering economies among developed nations. To date much of the economic growth has been tied to government stimulus programs. As those programs end and American consumers continue to refrain from spending due to unemployment and economic wariness, the economy is faltering once again. For example, the October durable goods orders increased .5 percent as opposed to 1.4 percent in September.

The third quarter GDP grew by 2.8 percent which was below government expectations.

The low interest rates in the U.S. are also creating some potential market volatility. If rates are kept at zero to .25 percent for an extended period of time, investors could begin to take on more risk taking in their impatience to make profits. This shows the fine balance between government stimulative monetary and economic policies can be difficult to maintain over a long period.

Mexico’s peso strengthened to 12.8942 pesos per U.S. dollar. The country’s foreign debt rating was lowered yesterday by Fitch to BBB. This is a one level decrease. The outlook was changed to stable as the government narrows the national deficit in the 2010 budget.

The Fitch downgrading actually created more certainty concerning Mexico’s standing and that’s why the peso rose. The peso is considered to be undervalued at this point and will most likely rise significantly over the next year. Mexico’s economy is still clearly struggling though with joblessness at 5.94 percent in October.

The Canadian dollar weakened against the U.S. dollar to C$1.0587. That means one Canadian dollar purchases 94.46 U.S. cents. The loonie fell as the price of oil fell to $76.10 per barrel for December deliveries. A fall in the equity markets also contributed to the currency’s decline.

Unemployment in Canada for October was at 10.2 percent but is expected to fall under 10 percent for the fourth quarter of 2009.

Sterling was at 1.6646 per U.S. dollar. The U.K. economy is expected to officially exit the recession in the fourth quarter. The country’s recovery has been slower that of the U.S. or the Euro-Zone.