Posted October 15, 2009
The Japanese yen weakened further against the euro as global economic recovery heats up. The Australian dollar continued its rise after it was indicated interest rates will be going up again. Sterling strengthened as the Bank of England indicates the quantitative easing program will be suspended.
The Japanese yen has been weakening against the euro and if it continues through today it will be a full 2-week slide. Investors are becoming more confident the recession is gaining strength and as a result they are beginning to move larger amounts of money into assets with higher yields.
The yen is at 165.48 yen per euro. The yen is also falling against the US dollar and touched as low as 90.99 yen. The new Japanese government is working on trimming debt and streamlining government operations even as businesses deal with falling export revenues.
The US will be reporting on US industrial output and it is anticipated it will show expansion. The continued signs of economic recovery in the US are leading to a sell-off of the dollar and yen.
The Australian dollar strengthened again as a result of investor confidence and changes in investment strategies. Australia just raised its interest rates by 25 basis points and has already indicated further increases will be coming in the near future. The yen fell to 83.82 yen per Aussie. The US dollar fell to 92.39 US cents against the Australian dollar.
The UK pound has been weakening before this week, but the there are now indications the government may suspend its quantitative easing program. If that is ascertained to be true, it is expected sterling will recover from its decline. The pound rose to $1.6371 against the US dollar and to 148.76 yen per pound.
The Bank of England has indicated the quantitative easing program will only be suspended though and not ended. This could be interpreted as confirmation there are still many weaknesses in the financial system that could delay economic recovery and require a restart of the bond buying program.
The Euro-Zone’s European Central Bank is considering the implementation of exit strategies and an increase in interest rates. Some bank members believe it is time to let the economy begin to operate naturally. As of Friday morning in the Euro-Zone the euro had reached a 14-month high of $1.4968 against the euro.
There had been speculation that Canada would be the next country to raise interest rates, but that is not going to happen anytime soon. The Canadian dollar weakened against the US dollar as the currency readjusted. The loonie has been strengthening on good employment numbers and rising commodity prices.
The Canadian dollar weakened to C$1.0338. The loonie has been approaching parity with the US dollar which has not happened since July 2008.
Canada’s main export is oil and oil is now at $77.97 a barrel for November delivery. The central bank will be deciding next week whether or not it’s time to raise interest rates.
The other currency making the news was the Polish zloty. The zloty rose to 4.1905 against the euro. The surge in the currency was primarily due to statements made by Andrzej Slawinski who is a central banker and a member of the Monetary Policy Council. Slawinski predicted advances in the zloty-euro exchange rate to pre-recession levels.
Growing interest in emerging markets as future leaders of global economic growth has attracted investors. The zloty appreciation’s potential only adds to that attraction. As it stands now the zloty has appreciated by 17 percent against the euro.