Summary Of World Currency Markets For January 2009

Wednesday July 8, 2009

So here we are with the first monthly report for this year, which reveals how things panned out during January.  If one thing was made absolutely certain at the end of 2008 it was that everyone was struggling to keep their heads above water.  The state of the economy at the moment is such that every country is having trouble maintaining a good exchange rate with other ones – although some are clearly finding it harder than others.

A new year has also brought a new Presidency in America, but will this have had any effect on their dollar?  And although many other countries don’t have a new President or leader to look to for advice, they are hoping that things will start to change soon.  This could be a futile hope just at the moment though.

So what did January 2009 bring to us?  Did it bring good news or bad?  Well it depends largely on which country you are looking at.  And that is our cue to take a closer look at what is going on. 

So with no further ado, let’s do just that.

An overview of the currency markets during January

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

There was no doubting that January was a big month for America.  So how did its currency fare during this time?  Did it leave Americans looking at figures on their currency converter that they were pleased with – or was there more work to be done?

As far as its battle against the British pound was concerned, the US dollar always seems to have the upper hand.  This was certainly the case during December, when it finished on 0.6844 for the year.  As soon as the markets reopened on the 2nd January, it capitalized on its power by pushing up slightly to 0.6930.  But there was plenty more to come.

It did lose ground slightly from the 5th January onwards, as it slipped back to 0.6890 on that day.  From there it seemed as if the pound regained some momentum and pushed the dollar back down to an exchange rate of 0.6539 to finish off that week.

But the British pound has been struggling like no other currency on earth recently.  It was hard to believe that it could possibly keep up this performance for very long – and indeed the US dollar had more in the locker to trouble the British currency in the rest of the month ahead.

By Monday of the following week the dollar had claimed 0.6686 pounds to each dollar, and the very next day that increased to 0.6870.  But the enthusiastic march of the US dollar faltered slightly as it went into the weekend, and it ended up finishing on 0.6701.  Could it do better as it went into the week beginning the 19th January?

That very date got off to a great start, as it managed to hit 0.6863 on that day – preparing itself for an even better day on the Tuesday.  This was when we noticed a real surge in the exchange rate, as it peaked at 0.7201 by the end of the day.  Could it keep this up?  The Brits were clearly hoping it wouldn’t be able to, but there was more bad news for them as the dollar crept up further to 0.7270 just twenty four hours later.

The question now was whether the US dollar had made all the gains it could in that month.  Well, the week ending the 23rd January saw the currency finish on 0.7336, so clearly the answer was no.  There was just one week left now, so could the pound pull things back a little, or were we looking at a dollar revitalised perhaps by its new leadership?

As it happened the final result was a surprising one.  The 27th saw an exchange rate between the two currencies of 0.7098.  That dropped back a little further the following day to 0.6992, but the US dollar finally managed a little spurt of energy to the finish line and ended up on 0.7005 on the final day of trading for the month on the 30th.

That meant it had gained relatively little over the month as a whole; the total amount gained was 0.0161.  Perhaps the Brits were breathing a sign of relief on this occasion – it could have been so much worse from their point of view.

Let’s move on now though and take a look at how the US dollar performed against the Euro.  Once again, while the Euro is arguably a little stronger than sterling at the moment, it isn’t the stronger of the two when it comes to the dollar.  So how did it perform during January?

Last time we left it with an exchange rate of 0.7185 Euros to the US dollar.  Just two days into January that had increased to 0.7211, so was this a clear sign of things to come?

It certainly seemed to be.  On the 5th January the exchange rate had pushed up a little further to 0.7362, and just twenty four hours later we saw even more action, as that increased to 0.7500.  But could the US dollar keep this up?  Was it really on top of the Euro – and could it stay that way?

Well it did slip back to a low of 0.7307 by the end of that week, but that was a misleading sign if you were looking for evidence of what was still to come.  By the 15th January it had pushed back up to 0.7642 again – quite a significant jump of 0.0335 during that period.  And there was still more to come as the US dollar seemed to find its footing against the Euro.

Although it slipped again to close out that particular week, it was soon back on the march again.  The 20th January saw a closing rate of 0.7642 being claimed by the US dollar – and it was now into the final third of the month, and looking for a good result.

The best exchange rate for that period was reached on 23rd, with a figure of 0.7815.  But while it failed to regain that success it did still pull back from a slight dip during that final week to end on 0.7802 for the month.  That meant that it had gained a little over six cents against the Euro over the course of the whole month – and that was certainly worth celebrating.  It seems that the Euro is having similar struggles to the British pound at the moment, if not quite as severe.

So what about the US dollar and its head to head against the Hong Kong dollar?  We didn’t see a lot of movement between these two during December, so would it be a different story this time around?

Last time we left the exchange rate between these two at 7.7500.  This crept up gradually over the first few days of the New Year, with a rate of 7.7572 being recorded at the end of the 9th.  The following week it managed to creep up a little further to 7.7609 but it soon slipped back again the following day.  Could the US dollar really make any real headway here at all this month?

As it turned out, that would be the highest point of the whole month.  By the time the markets closed for the last time in January, the US dollar was claiming a total of 7.7558 Hong Kong dollars.  That equates to an increase of just 0.0058 over the course of the month.

Finally let’s take a brief look at the Japanese yen, and see how the US dollar performed against that.  The dollar actually lost ground in the final month of 2008, so could it regain any of that loss during the first month of the year?

The last time we looked at it, the US dollar was claiming 90.637 Japanese yen to the dollar.  This went up to 91.331 on the 2nd of the month, and kept on increasing until it reached 94.389 on the 6th.  From there it lost ground once more, dipping down to a low of 89.319 on the 14th.  Had we already seen the best that the US dollar could do on this occasion, or was there more in reserve?

It managed to creep back up to 90.512 two days later, but that was about as good as it got.  The US dollar languished in 88.0 and 89.0 territory for much of the rest of the month, except for claiming 90.054 on the 29th.  The final figure for the month settled on 89.715.  That meant it had lost a further 0.922 over the month as a whole – not nearly as much as the month before, but it wasn’t a desirable amount.

Meanwhile, over in Europe…

So how did the Euro do up against the British pound last month?  The pound had dropped a huge 0.1551 Euros during the final month of 2008, so it was clearly looking to recoup as much of that as possible to start the New Year on a good note.  But could it do it in reality?

They started from 1.0498 left over from the end of December.  The first real piece of good news came on the 5th, as the markets closed on 1.0686.  That got even better over the following few days, with 1.0897 the next day, 1.1058 on the day after, and 1.1194 the day after that.

An almost inevitable slip followed, although it was only down to 1.0974 on the 13th.  It soon shot back up again to close the week out on 1.1244.  Unfortunately it lost a bit of ground the following week, sinking to a low of 1.0592.  It was getting hard to imagine what was going to come next, and as the month started to draw towards its end it was difficult to predict which currency would come out as the winner for that month.  Would the Euro prove much stronger, or could the British pound pull something out of the bag to finish on a high?

As it happened, we should have voted for the underdog.  Because by the time the markets closed for the last time in January, the pound stood at 1.1137 against the Euro.  It had managed to gain back most of the losses it had experienced the week before.  Over the month as a whole it had gained an impressive 0.0639 over those few weeks – bringing the pound a little further away from that horrible prospect of parity with the Euro.  Let’s hope for the sake of the pound that it can continue going in the right direction.

Elsewhere last month…

As always there was plenty more going on in other countries too.  The Euro had an interesting journey against the Australian dollar, for example.  From a standing start of 2.0274, the Euro slid back to 1.8727 on the 6th.  From there it had a real up and down month before finishing on 2.0115 at the end.  So despite the huge jump up from that figure on the 6th, the Euro actually lost a little ground overall in what must have been a frustrating month for them.

The Australian dollar also went head to head with the New Zealand dollar.  It started off the New Year on 1.1932, and by the time the month was out the New Zealand dollar was feeling more of the frustration that the Euro must have felt that same month.

It climbed up to 1.2142 on the 5th before crashing back down to a low of 1.1861 on the 12th.  So what was to come next?

As it happened the only way from that point was up, apparently.  The high point was reached on 29th, with a figure of 1.2683.  That slipped slightly before the month ended, but the Australian dollar still ended up on 1.2561 – a full 0.0629 more than it had started with at the beginning of the month.

As is evident, the seas of the currency markets are particularly choppy in places at the moment.  We can expect this to continue for some time into the future as well, so stay tuned to see what happens next.

Looking forward

So it was an interesting and revealing first month of the year as far as the currency markets were concerned.  While some did rather well, others struggled to retain any kind of equilibrium.

And as we mentioned last month, the woes of the economy on a worldwide basis aren’t going to resolve themselves anytime soon.  As we will no doubt see in the months to come, some currencies may bear the strain rather better than others. 

It will be fascinating in particular to see how the Euro fares.  One recent opinion piece stated that the Euro wouldn’t survive for many more years.  While that might seem outlandish, it’s a fact that no single currency has ever lasted indefinitely, so why should this one be any different?  We’ll be interested though to see whether the Euro does survive this current downturn – and if it does, what state it will be in afterwards.

So on that note we will bid goodbye for another month.  But make sure you’re here again next month, to see what happened next in the worldwide currency markets.