Yen And Dollar Weaken As Investors Seek Profits

Posted December 02, 2009

The yen fell against the U.S. dollar as the global economic recovery strengthens. Europe is making its first plans for pulling bailout funds from the market. Brazil will probably raise interest rates soon as the economy continues to show steady improvement. The Canadian dollar strengthened as commodity prices continued to rise.


The yen weakened again against the U.S. dollar to 87.81 yen per dollar. The yen also weakened against the euro to 132.49 yen per euro. The decline is due to investors moving money into higher yielding assets as the global economic recovery becomes more certain each day.

The yen fell against most major global currencies on signs the U.S. and European economies are improving. The European central bank is working on a plan for rolling back bailout programs started at the height of the financial crisis.  Investors are increasingly shedding risk avoidance strategies which are leading to a weaker yen and U.S. dollar. In the U.S., Bank of America is prepared to pay back the $45 billion bailout funds provided by the government which is yet another sign that financial markets are getting on more solid footing all the time.

The dollar fell to $1.5088 against the euro.  In the U.S. the unemployment numbers continue to rise with 170,000 jobs lost in November. The markets seem to have factored in this information already. Unemployment is called a lagging indicator and there are no signs yet that certain sectors like manufacturing are ready to add jobs. The fear is that companies will remain lean even as economic conditions accelerate making this a jobless recovery.

The good news though was that the Institute for Supply Management index rose to 51.5 in November.

The euro put in a strong performance yesterday as it rose against a majority of the major global currencies. The European Central Bank will be ending its emergency loan program which means financial markets will soon be on their own once again. The ECB will be the first exit program implemented among developed economies other than the increase in Australian interest rates.

The Euro-zone interest rate is at 1 percent. The U.S. interest rate is at zero percent. Both will be held at their historic lows for an extended period of time.

In the US, it appears that Ben Bernanke will be approved for a second term as the Federal Reserve chairman. It is under his watch that interest rates were reduced to zero. He is being criticized for having some responsibility for the financial collapse over a year ago by allowing lax supervision of banking operations.

The Brazil real held against the U.S. dollar at 1.7210 reais per dollar. Brazil’s industrial output has risen for the 10th straight month as of October. This is a good indicator that interest rates will probably be raised soon.

The Canadian dollar rose to C$1.0456 against the U.S. dollar. Canadian exports are increasing as commodity prices rise. Gold prices are now over twelve hundred dollars an ounce and Canadian lumber shipments to China are climbing. The prediction is that the loonie will reach parity with the U.S. dollar at some point within the next twelve months.