World Currency Markets Respond to Economic Data and Greece Debt

Posted March 13, 2010

Across the board the currency markets responded to the economic data released as well as improved outlook over the Greek debt problems. This caused numerous currencies to see record movements.


Concern about Greece’s default risk seemed to ease on Friday as investors looked to the currency markets. Reports out also indicate that a US economic recovery was in sight. The combination ushered more investors to look towards riskier assets for their investments Friday.

For the second week, stocks gained in the US. The euro rose to a one moth high versus the American dollar as well. The yen fell against each of the 16 most commonly traded pairs as well. The Japanese government says that it will intervene if the currency continues to strengthen. The Federal Reserve in the United States signaled that it would hold the key interest rates steady at the meeting planned for the upcoming week.

In the numbers, the US dollar fell one percent to $1.3769 against the euro. The US dollar was at $1.3626 on March 5th. On Friday, the dollar did make it to $1.3796 briefly, which is its weakest point since February 11th against each of the 16 most commonly traded pairs.

The yen moved to 124.69 against the euro. This was a depreciation of 1.4 percent from 123 just one week ago. Against the yen, the US dollar rose 0.3 percent to 90.56. That is the second weekly gain it has had. The US dollar hit 91.09 on Friday trading. That is the highest level it has rose to since February 23rd.
For the week starting March 8th, the Standards and Poor’s 500 Index rose one percent. The MSCI World Index gained 1.4 percent. It is a measurement of stocks in 23 developed markets across the globe.

Also helping to fuel the currency markets on Friday was a radio address made by European Central Bank President Jean Claude Trichet. In an interview with Bloomberg Radio, he said that investors and credit rating companies would be appeased by the Greek’s plan to cut its budget deficit. European nations have also said that they would help to back Greece if it became necessary to do so.

In the Asian currency markets, a rally was evident mainly because of the improved outlook on the Greece debt and the evidence that the economy is improving. The South Korean rose 1.1 percent to 1128.20 against the US dollar by Friday. The Malaysia ringgit moved up 1.7 percent over the last week to 3.3070 against the US dollar. This marks the most improvement it has seen since October 9th.

The Swiss franc improved against the euro on Friday. It moved past 1.46 against the euro for the first time in a year. This happened even though the central bank warned that it would stop excessive appreciation if it became necessary to do so.

In Canada, the currency moved toward C $1 against the US dollar. This was fueled in part by data that showed that employment rose in the month of February, marking the second month of improvement. This new data is also likely to lead to the central bank moving towards raising the low 0.25 percent target lending rate that is currently in place. The currency hit C $1.0256, the highest since July of 2008.