Summary Of World Currency Markets For May 2009

Wednesday July 8, 2009

Welcome back to our monthly look at how the various world currencies are doing when pitched against each other.  As we saw during April things can certainly have their ups and downs during the course of a month, so perhaps we will see a similar pattern this time around.

There is no doubt that your use of a currency converter can get quite interesting during the course of a month, as the world continually adjusts to the events of the recession.  Some believe the worst is over but this seems too good to be true just yet.

The US dollar actually lost out to the British pound last time, with some two cents knocked off its exchange rate over the month as a whole.  This alone was something of an event, given the fact that the US dollar has been strongly holding up against the weakened British pound for quite some time.  When it came to the Euro it could do little better, with the tiniest of increases during the month of April.

So what will we see this time?  Will we see better results, or could we expect to see the US dollar dipping down still more?  Let’s find out what actually happened during May 2009.

An overview of the currency markets during May

The ongoing tussles of the US dollar

Last time we compared the exchange rates between the US dollar and the British pound and found that the dollar ended up claiming 0.6729 British pounds by the end of the month.  That was 0.0265 down on the last stage the month before, so we were looking for better results during May.

We started the month with a prolonged weekend due to the early May Bank Holiday, so things didn’t get underway at all until the 4th.  And even then you would have been forgiven for thinking nothing of note had happened.  The final exchange rate on that day was little different from the day before, with a closing rate of 0.6728 on the cards.

It seemed to get things swinging ever so slightly in favor of the British pound again though.  On the very next day the exchange rate dipped to 0.6609.  Going below that 0.67 threshold seemed to be very significant though, in light of what happened throughout the rest of the month.

Things didn’t fluctuate too much between the US dollar and the British pound between that point and the 11th May.  The exchange rate on that day was 0.6620, but that slipped back to 0.6529 the day after.  You might have thought that was a momentary slip for the US dollar, as it was back up to 0.6605 the day after.  It did stay in the 0.66 region for another day, but on the 15th May it slipped back to 0.6605, and it never regained the 0.66 territory for the whole of the rest of the month.

At this midway point during the month things weren’t looking too encouraging for the US dollar.  We weren’t talking about huge losses here, but it was certainly the case that things were slowly but steadily turning in favor of the British pound.  The real question now was whether it would continue throughout the second half of the month, as it had in the first.  One had a feeling that it could well turn out like that – particularly after the performance we had seen last month.

After the weekend, Monday continued the ominous decline by closing on 0.6539.  By the following day the US dollar had slid a little further to 0.6460.  It looked like the slow drip, drip, drip was going to continue for the rest of the month, no matter what else might happen.

And indeed that turned out to be the case.  The next barrier was surpassed the very next day, as the dollar left the 0.64 territory and finished up on 0.6382.  And as if that wasn’t bad enough, it only took one more day to finish up on 0.6284 for the week.

The next week, beginning 25th May, saw the exchange rate drop even further to 0.6284.  It was clear that this was going to be a good month for the pound – the only question was how much of a beating the US dollar would take in the process.

And it carried on losing ground until the last trading day of the month, when the exchange rate settled on 0.6191.  That meant the US dollar had lost ground against the British pound for the second month running, by a total of nearly five and a half cents.  That was far more than it lost last time as well, giving this loss a worrying perspective.  Did this mean there was worse still to come?

We’ll find out next month on that score.  But in the meantime let’s take a look at how the US dollar performed against the Euro during May.  The final figure last time was 0.7532, representing a tiny gain overall.  Could it do better this time, or would it mirror the result it had achieved – if that is the word – against the pound?

When things got underway on the 4th, there was a slight upward movement for the dollar.  Slight really was the word though, as it only got as far as 0.7562.  The very next day the Euro pushed it back to 0.7461 again, so it seemed as if a stalemate could be developing.

The next day that did look exactly as if it was happening, as the rate finished up on 0.7506.  Good news for the US dollar you might think – except that it was beaten back again the following day to 0.7483.  The tussle was clearly not going to end overnight.

That week came to a close on 0.7448, but on the 11th things got worse for the dollar as the Euro pushed back to 0.7367.  The closest it could get to 0.74 territory again was with the last exchange rate of the week, as things finished up on 0.7397.  It looked as though the Euro also had the upper hand here, much as the British pound had elsewhere.

The dollar rallied slightly on the 18th with a figure of 0.7410, but that turned out to be as good as it would get for the whole of May.  To say things started to dip would be an understatement, as the week ending the 22nd May saw a closing exchange rate of just 0.7157.

It was now really a question of whether the US dollar could muster up the strength to battle back and at least minimise the damage.  It did manage to creep back up to 0.7217 on the 28th, but unfortunately it couldn’t hang on to even that small improvement.  The last trading day of the month saw a figure of 0.7093 against the Euro – meaning it had lost out on 0.0439 over the month as a whole.  It wasn’t quite as bad as the loss it experienced against the pound, but it was certainly bad enough.

Next up we take another look at the head to head between the US dollar and the Hong Kong dollar.  There has really been little change here over the past two months, and in April we finished up with an exchange rate of 7.7499.  Could the US dollar get over into 7.75 territory or would it leak the advantage here too?

The first day back after that long weekend saw the US dollar make it over into that territory, finishing up on 7.7501 by the end of that first day.  But it was back to 7.7499 the very next day.  Was this a sign of what was to come, or was this just a blip in what would be a good month for the dollar?

The US dollar got back up to 7.7502 on the 7th, and then dipped to 7.7499 on the 11th.  But that would turn out to be the last time that happened for the entire month.

It was back up to 7.7501 on the 12th, and as the month drew to a close the final figure between the US dollar and the Hong Kong dollar was recorded as 7.7509.  That meant that on the whole it was the US dollar which gained a small advantage, adding 0.001 over the course of the month.

Finally this month let us take a quick look at how the US dollar performed against the Japanese yen.  The last figure we had during April was 98.184, the US dollar having lost some ground during that month.  Could it do better in May?

As it happened the peak figure for the month occurred as early as the 4th, finishing on 99.463 for the day.  The lowest point was on the 22nd, with 94.052, but then the month finished on 95.914.  That meant the US dollar had lost out on 2.27 over the whole month.

Meanwhile, over in Europe…

This is the point in our report where we take a brief look at what has been happening in Europe over the past month.  The pound did well against the Euro in April, as it regained the losses it had racked up the previous month.  We were hoping now that it would pull ahead slightly instead of falling behind again.

The last day of April saw an exchange rate of 1.1193, and it climbed as high as 1.1303 before dipping back down to 1.1113 again on the 13th.  But the pound finished strongly on 1.1456 at the end of May – giving it a healthy increase of 0.0263 overall.

Elsewhere last month…

The picture between the British pound and the Australian dollar made for interesting viewing last month.  It was a bit of an up and down affair, with a starting figure of 2.0312 falling to 1.9847 by the 11th of the month.

The pound climbed back up to 2.0128 by the 15th though, and although it dipped to 1.9971 by the 19th it didn’t stay there for long.  It hit 2.0489 on the 26th, but it couldn’t quite hang on to those heights to last out the month.  By the time May came to a close we were on an exchange rate of 2.0244.  That meant a slight increase of 0.0068 overall – not as much as you might have expected given the ups and downs.

But what about the Euro against the Australian dollar?  Did that have a similar picture as well?

Well the Euro started on 1.8146, but there were plenty of ups and downs as it dropped as low as 1.7563 on the 19th of May.  The Euro picked up a little by the end of the month and settled on 1.7671, but that still meant the Australian dollar had the upper hand on the whole.  It lost nearly five cents overall – quite a lot to stomach for just one month.

Looking forward

So once again we had an interesting month to get to grips with.  It wasn’t the best time for the US dollar but at least it had the odd result where it didn’t lose any ground.

But it does make for intriguing possibilities during the month of June.  Will it be an equally troubling month for the US dollar?  If it is, it could point to a deepening problem for the currency.  For a while now it has appeared very strong considering we are in a recession that is reverberating around the world.  But it is anyone’s guess as to whether it will remain that way. 

We sometimes see the US dollar as being one of the strongest in the world.  But of course we know that it isn’t always that simple, and it may not remain that way for ever.  That is why we should look closer when we get results of the nature that we have seen during May.  They may point to some interesting times to come.

So on that note, we will leave you pondering what we’ll be reporting next time.