Summary Of World Currency Markets For February 2009

Wednesday July 8, 2009

Yes it’s that time again to see how the various major currencies did on the currency markets during February 2009.  As the recession gathers apace it is clear that we are having a continually rocky time as far as the currencies are concerned.

Some people are cancelling holidays or postponing them indefinitely, but others are still punching those numbers into their favored currency converter.  They want to see whether their own currency is holding up against this onslaught, or whether it is in a weakened position.

So what exactly did happen during February?  Did we get a raft of relatively good results?  Or did the current situation put paid to that?

Let’s find out.

An overview of the currency markets during February

How did the US dollar perform against many other major currencies around the world?

The US dollar always seems to be one of the strongest currencies around.  We’ve seen that in the past with continually good results even when times are rough.

But how did it do during February?

It always seems to have a choppy time against the British pound, but in January it saw very little movement over the month as a whole.  It finished up on 0.7005 on the final day of trading that time, so let’s see whether that improved at all during February.

As it turned out, the first ten days clearly belonged to the British pound.  From the starting point mentioned the dollar dropped back to 0.6944 on the 4th.  The very next day saw an exchange rate of 0.6843, and that dropped still further to 0.6803 as we went into the weekend.

So what would the following week bring?  Would the US dollar be able to crank things back up and put in a better performance again?

The answer on Monday seemed to be a resounding no.  By the time the markets closed on that day the exchange rate had pulled back even more to 0.6695.  But that is where things started to change.  The very next day saw a minor jump back up to 0.6764, and that seemed to put the US dollar back in the driving seat for the whole week.

An improvement to 0.6956 and then back over the 0.70 mark the very next day meant that even when the dollar lost a little bit of ground later in the week, it wasn’t enough to ruin it.  The final figure on the 13th was 0.6895, marking a step forwards by the US dollar, and a step back for the British pound.

So what would happen next?  We were virtually halfway through this short month, and you got the feeling that there was still plenty more that could happen.

The next week got off to the best start for the dollar, as it pushed back up to the heady heights of 0.7007.  It peaked at 0.7022 before dropping back slightly – but it was enough to make us wonder whether it had now got the upper hand and would continue to wield it for the foreseeable future.

By the time Friday night beckoned it had dropped back a little to 0.6997, but that still represented an improvement on last week.  It was now down to what would happen during the final week of the month.  The British pound was trying valiantly to secure a good result – which it needed – but there was no doubt that the US dollar was still firmly in the driving seat.

The pound managed to gain a little ground on the Monday, leaving the closing exchange rate at 0.6860.  But from there on it was all in favor of the US dollar.  A slight increase the following day to 0.6892 paved the way for more increases later in the week, and by the time the month came to a close the exchange rate stood at 0.7063.

That meant the increase for the US dollar during February was smaller than you might think – a total of 0.0058 in all.  Given the ups and downs we experienced you might have expected it to be more, but it just goes to show how volatile the markets can be at times like this.

Let’s move on now and take a look at how the US dollar did against the Euro.  This can be quite an interesting one to watch too, since the Euro has had its moments of weakness as well as strength just lately.

The previous month ended with the US dollar bagging 0.7802 Euros, so let’s see if it could improve on that.

The first half of the month was really something of an up and down affair.  The exchange rate dipped back to 0.7782 on the 3rd, before going back up again the following day – and then back down.  It finished on 0.7814 for the week, before losing ground on the 9th and falling back to 0.7687.  This was going to be an interesting battle.

It managed to get back into the 0.77 region and stay there for the rest of the week, and then from the 16th onwards we started to see a push by the US dollar.  At the close of play on that day the exchange rate was 0.7833, and that went up to 0.7915 the very next day.

As things turned out, the exchange rate meandered around in the 0.79 range for a few days, dipping back to 0.78 and then going back up again.  But it never quite had what it took to break the 0.80 mark, and on the last day of trading in February the exchange rate between the US dollar and the Euro stood at 0.7908.

That meant that the US dollar did see a better improvement overall against the Euro than it had against the British pound – a total of 0.0106 in all.  So once again the changes we were seeing on a weekly basis were largely being ironed out as the month went on.

Let’s take our usual look at the head to head between the US dollar and the Hong Kong dollar now.  At the end of January the last exchange rate figure was 7.7558 – the US dollar having claimed a small increase of 0.0058 over the month as a whole.

The rates stayed in the 7.75 range for the whole month, so it was just the finer points that were going to be fought over.  At the end of the first week the rate was stuck at 7.7546, and seven days later that had changed to 7.7525.  There really wasn’t a lot of dramatic news to report between these two during February.

The US dollar managed a small increase by the time the third week was over, pegging the exchange rate at 7.7540.  And once again what small increase there was went to the US dollar by the time the final week of the month drew to a close.  The closing exchange rate was 7.7549 by then, so as you can see it wasn’t a month of dramatic ups and downs as far as these two currencies were concerned.  All in all the Hong Kong dollar had managed to improve things by the smallest sum of 0.0009 over the whole month.

Finally we saw the US dollar bag an exchange rate of 89.715 against the Japanese yen last time round, losing out on 0.922 during the month as a whole.  What would happen this time?

As it happened there was good news this time – markedly good news too.  The exchange rate went steadily in the favour of the dollar; it pushed through to 91.200 on the 6th, and although it dropped back down to 89.971 briefly on the 12th it bounced back to 91.702 the next day. 

From there it climbed steadily to reach a high point of 98.051 on the 26th, before dipping back to finish on 97.461 for the month.  So clearly the US dollar really had an excellent result here, and it gained a total of 7.746 against the beleaguered yen.

So at least in this respect it was indeed a good month.

Meanwhile, over in Europe…

So let’s move across to Europe now and see what happened there during February.

The Euro always has something of an interesting time against the British pound, and last time we saw that the pound was pegged at 1.1137 against the Euro.  What would happen this time?

It dropped back to 1.1069 on the 2nd of the month, but then it climbed steadily up to 1.1486 on the 6th.  If we thought that was worth celebrating we didn’t have much time for it to sink in before it dipped back down to 1.1074 on the 12th.

It did manage to creep back up to 1.1310 by the weekend, but no sooner had the following week got underway than we were back down to 1.1179 again.  On the 23rd the pound had managed to push back up to 1.1389, but unfortunately it didn’t manage to hang on to that position.  By the time the month came to a close the pound was claiming 1.1196 Euros.  That meant the pound had gained a meagre 0.0059 over the course of the month as a whole.  Better than nothing, but not as good as the Brits had hoped.

Elsewhere last month…

As we know, there is plenty of activity elsewhere in the markets too.  The Australian dollar had an up and down time against the New Zealand dollar.  It started on 1.2561, before heading up to 1.2719 on the 6th.  It dipped down to a low of 1.2461 the following week, before finishing that same week on 1.2536.

And it seemed as though the New Zealand dollar never really got much of a look in at all.  The Aussie dollar finished on 1.2706 for the month, gaining just under a cent and a half over the month as a whole.

Elsewhere the Japanese yen went up against the Euro, and saw a steady drop as the month wore on.  From a standing start of 0.00869, the yen went up and down before reaching 0.00838 on the 9th.  Three days later a figure of 0.00866 looked a little better, but it wasn’t long before we were back down to lower levels.

And by the 26th of February the exchange rate had dropped to 0.00797 – and even though it crept back up to 0.00811 to finish off the month, it wasn’t a good result for the yen.

Looking forward

We always get mixed results when we take such a global view of the currency markets.  That is the very nature of the beast of course, but in these uncertain times it is fascinating to see what happens and when.

One announcement from the leader of a country can send their currency into turmoil.  We’ve seen it before and we will no doubt see it again too.  It is a very finely balanced act at the moment, and some currencies seem to be weathering the storm rather better than others.

It is quite something that the US dollar is doing as well as it is, because the country is not escaping from the worst of the recession.  It is a testament to the currency itself that it is bearing up under the strain of what is going on.

So of course we will be back as usual next month to reveal what has happened in the intervening time.  As we press ahead into these uncertain and murky waters, we can expect many more ups and downs to come.  Which currencies will bear the brunt of the hard times, and which ones will bear up more readily we wonder?

The US dollar seems to be holding up well now, but will it continue in that vein?  With a recession that could continue to be felt for years rather than months, we clearly have a long way to go yet before we know the answer to that question.

Until then, all we can do is brace ourselves to find out the next moves.  We’ll see you next month.