Yen Hits 14-Year High Against U.S. Dollar

Posted November 27, 2009

The yen hit a 14-year high against the U.S. dollar causing concern the appreciation will negatively impact economic recovery. Dubai had to postpone a debt payment causing a ripple effect in the marketplace. The Swiss franc fell after the central bank sold francs in the open market. The Canadian dollar weakened against the U.S. Dollar.

 

The yen hit a 14-year high against the U.S. dollar causing concern there will be a need to intervene in the market to preserve export values. The yen’s strength is coming from the greenback’s weakness rather than from specific Japanese economic or monetary conditions. Currency market intervention will only be instituted if it appears the appreciation will continue unabated and without correction.

The Japanese yen hit 86.30 yen per U.S. dollar which is a value not seen since July 1995.  The yen strengthened against the euro to 129.79 yen per euro. The government will only intervene in the market if it sees any abnormal currency movements.  The central bank will watch the yen’s value closely because too much appreciation will hurt economic recovery.

The U.S. Treasury Secretary Timothy Geithner and the Federal Reserve Chairman Ben Bernanke have both indicated a weak dollar will be allowed as long as its slide is orderly. Like Japan, any abnormal movement will require action.

The U.S. dollar was at $1.5001 against the euro while the Swiss franc fell after it appeared the Swiss national bank sold francs in the open market. The franc was at 1.0029 per U.S. dollar or near parity. The franc was at 1.5077 against the euro. The Swiss government began market intervention late last winter.

The big news in the economic markets was Dubai’s attempt to reschedule a payment date for a debt payment coming due. The once extravagantly wealthy nation has been hard hit by the recession and falling oil prices in addition to an abnormally high debt burden for projects in the works at the time the financial markets collapsed. The indications of inability to repay debt drove investors into safe haven assets for the most part.

The problems in Dubai have led global investors to express concern over the stability of the economic recovery. The recovery appears to be quite fragile and could still collapse leading to a double dip recession. Improving unemployment and housing purchase numbers in the U.S. have brought some lessoning of this fear but the recovery still remains weak.

The Vietnam dong weakened to 18,488 dongs per U.S. dollar. The Vietnamese bank devalued the currency in order to fight rapidly increasing inflation.

The Canadian dollar fell against the U.S. dollar largely due to investor actions taken in response to Dubai’s debt repayment problem. There was a sell-off in the oil and gold commodity markets. Oil fell as low as $76.17 a barrel and gold fell to $1,185 an ounce.

The loonie weakened to C$1.0546 when paired with the U.S. dollar. This is the equivalent of one Canadian dollar buying 94.28 U.S. cents. The Canadian dollar has risen 16 percent this year against the U.S. dollar.

The Hungarian forint fell to 271.88 forints against the euro after Dubai’s financial problems drove investors back to less risky assets.  The Polish zloty also fell to 4.1505 zlotys per euro.

Mexico’s peso was another victim of the Dubai debt issue as investors returned to safe haven assets. The peso fell to 12.9988 pesos per U.S. dollar.

 

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