Summary Of World Currency Markets For October 2008

Wednesday July 8, 2009

September’s report on what was going on around the world with some of the major currencies was as ever an eye opening one.  For starters the US dollar was showing its strength once more, and we shall be taking a look at whether it was able to carry on with that momentum during October, as the Presidential race continued apace.

In general news, the currency markets are as ever affected by the possibility of a recession.  Some countries appear to be nearer the tipping point than ever, while others are trying to hold back to delay what is becoming more than an inevitable moment with each passing day.

But while some people may have been checking the currency converter to see how far their money would go abroad, the current situation means that some will be postponing their vacations indefinitely.  The exchange rates for some people just aren’t that good at the moment.

So with no further delay let’s see how things panned out last month.

An overview of the currency markets during October

Is the US dollar still gaining strength and ground over other currencies?
Last month we saw that the US dollar was easily staying in control when it came to the British pound, and there was every indication even then that things wouldn’t change anytime soon.

And in fact that turned out to be the case.  The closing exchange rate on the 1st of the month was 0.5623, and while the dollar was clearly looking to improve on that as soon as possible, it only barely broke through the 0.57 barrier briefly on the 7th.

A sign of better things to come for the dollar came on the 10th, when the exchange rate finished on 0.5876.  Things went up and down a little until the 21st, when the dollar finished at 0.5893 for the day.  That heralded a big jump the following day to 0.6136, and that wasn’t the peak for the month either.

The pound was clearly having a rough time, what with the bad economic forecasts and the threat of an impending recession getting ever closer.  On the 24th the dollar managed to close for the weekend on 0.6399, leaving the Brits wondering if their currency was going to be further devalued the following week.

First blood the following week didn’t go in favor of the Brits either, as the US dollar consolidated its position by finishing on 0.6471 for the day.  Could things get any better for the dollar – or worse for the pound?

As it happened that turned out to be the peak for the month, but although the exchange rate dropped back a little after that, it didn’t drop by much.  And by the time trading finished for October on 0.6168, the Americans would have been more than pleased by the result they had during the month.  Overall they managed to increase their exchange rate by 0.0643 over the course of the month, and there is every reason to expect that a similar picture will be on course to be achieved next month.

The pound may bounce back of course, but we don’t expect that to happen very soon, and there is always the chance that the Presidential election could affect things as well.  We shall see next month.

Last time we saw that the US dollar also did well against the Euro.  While the Euro has perhaps been a little more robust than the pound of late, it is still no real match for the dollar.  So how did it fare against it during October?

0.6991 was the figure we were left with at the end of last month, as the US dollar stepped up to the plate and made doubly sure it was in control over the Euro.  It managed to step over the 0.70 threshold on the very first day of trading in October, with 0.7101 as the finishing post on the 1st.

By the end of the week it had upped that a bit further to 0.7228, and its show of strength continued for some time to come as well.  The 0.73 barrier was smashed through with force on the 6th, and it managed to stay there for most of the time until the 16th, when it increased the pressure even more.  By the end of that day’s trading the exchange rate stood at 0.7403.  A final flourish before the weekend hit saw the dollar increase its standing by pushing the rate to 0.7460.

But if those looking at the state of the Euro thought the worst could be over, they would have been wrong.  This was clearly a month where the US dollar was on a roll, and there seemed to be no stopping it.  Not yet, anyway.  On the 21st the dollar stood at 0.7584, but after 24 hours of vigorous trading that figure had been pushed up to 0.7786.  The Euro was clearly on the ropes by this point; the only question left now was whether it could pull anything back by the end of the month.

But it seemed as if the answer was going to be no.  On the very next day the exchange rate changed again to 0.7806, and from there it kept climbing, giving the strength to the US dollar and leaving the Euro scrabbling for any kind of positive result it could find.

The US dollar finally managed to break through the 0.80 barrier on the 27th, as it claimed an exchange rate with the Euro of 0.8025.  From that point it did drop back marginally to concede some ground to the Euro by the end of the month, when it finished on 0.7838.  That represents a huge increase for the dollar though, and a bad month for the Euro with a difference of 0.1034 since the end of last month.  What more could happen next time round, we wonder?  We can only wait and see if the US dollar can manage to exert even more pressure next month.

Now last time we saw that the Hong Kong dollar had what it took to go up against the US dollar, so did it manage to continue that trend for another month? 

The US dollar finished on 7.769 against the Hong Kong dollar last month, and although it pushed up to 7.770 by the end of that week, it didn’t have quite what it took to bag another good result.  By the same time the following week the exchange rate stood at 7.759, and it rose and fell steadily as the month went on, not registering a significant rise for the US dollar at all.

It also finished lower overall by the end of the month, as it finished on 7.751 Hong Kong dollars.  So the pattern continued here with the Hong Kong dollar having what it takes to go up against the US dollar and really put up a fight.  The US dollar lost a small amount of ground here last month, losing 0.018 overall.

The Japanese yen put up something of a fight as well previously, and October turned out to be a really interesting month.  After finishing on 105.20 on the last day of September, the figures peaked very early for the month – on the 1st – for the US dollar.  It managed to get an exchange rate of 106.20 on that day, before losing its grip completely.

It fell steadily to hit 100.74 on the 9th, before dipping below the 100 mark the very next day, ending on 99.18 for the week.  Trading the following week saw it climb immediately back over the 100 mark again, before finishing up on the 21st with a rate of 100.92.  The very next day it fell to 98.79, and then things almost went into freefall.

The low point of the month came on the 27th, when the exchange rate fell to 92.89.  But after that a little of the damage was repaired until the last day of the month, when the rate finished on 97.96.  So that represents a drop of 7.24 over the whole of the month, giving us something to watch next time around.  It’s clear that the US dollar has its strength, but not in every country and against every currency.

Meanwhile, over in Europe…

This is where we traditionally look at the two main currencies in play – the Euro and the British pound.  Neither of them are particularly noted at the moment for their unswerving strength, so looking at the two of them head to head can be quite interesting.

The pound finished up by claiming 1.2653 Euros to the pound on the last day of September, and as it turned out October would be a pretty seesaw month.  The 6th saw the exchange rate peak at 1.2939, before dropping back to 1.2531 just four days later.

Ten days after that the pound had fought back again to claim an exchange rate of 1.2959, showing that here at least it had some power.  But the next push came from the Euro, as it settled on 1.2402 on the 27th.  The 31st saw the pound claim back the last piece of ground for the month though, as it ended on 1.2708.  That means it made a little bit of progress all in all for the month, as it saw an overall rise of just 0.0055.  Not as great as we had hoped, but at least it was heading in the right direction.

Elsewhere last month…

The Hong Kong dollar lost some ground against the Japanese yen over the course of the month.  From finishing on 13.540 at the end of September, it had a rocky month all in all during October, before ending on an exchange rate of 12.638. 

The British pound had a similarly bad time against the yen too.  At the end of September we were looking at an exchange rate of 190.39, but by the time October had run its course that had been reduced to just 158.81.  That’s a drop of 31.58 over a single month.

But other countries experienced a similar drop as well.  The Australian dollar lost some ground against the New Zealand dollar last month.  On the last day of September it was enjoying an exchange rate of 1.191, but by the end of October that had been eroded to 1.137.  Mind you, it had gone as low as 1.104, so it did improve from that low point.

Looking forward

So it is clear that the turmoil that is going on with the world economy is still being felt throughout the currency exchange rates.  Some currencies are doing well but that always comes at the expense of others. 

The US dollar is probably one of the strongest ones around at the moment, and whether the election will have any bearing on that in the forthcoming couple of weeks is uncertain.  It is just the kind of news that can affect the financial markets in many ways, as people look forward to a different way of working in the US government.

But for currencies like the pound and the Euro, whose respective countries seem to be struggling to a greater extent than America is at the moment, it could be a long time before we see good results.  The threat of that recession is too much to bear in many ways, and if it does come to pass then things will only get worse before they get better.

That might sound unduly negative but we do need to be realistic here.  We cannot expect to move through hard economic times in the matter of a few days, and similarly we can’t expect our currencies to continue to perform well indefinitely.

So we shall be here as per usual next month too, in order to give you the latest developments between the major currencies of the world.  Which ones will come out on top?  And which ones will have a bad time of it once again?

We’ll be here to find out, so make sure you join us.