Archive for January 2009

The Swiss Franc in 2009

January 30, 2009

Yes, another currency forecast…….

This week many of the world’s movers and shakers are attending the Davos World Economic Forum. There, they will spend time discussing the world and the problems it faces.  While Barack Obama has chosen not to attend – and has even called for his closest advisers to remain at home as well in order to deal with the crisis – there are many who have already used the forum as a platform to speak to the world.  Gordon Brown has called for the world to come together to fight the recession, and has applauded the hefty fiscal stimulus packages that have been passed.

So they are all wrapped up in the snowy mountains of Switzerland, so let us have a slightly closer look at the country.

It has always been associated with immunity (not always in the most positive light) and remains the third lowest yielding currency in the world.  This means that it is viewed as low risk, and something of a safe haven for currency traders – especially when things get tough globally.  In 2008, like the Japanese yen, it has had a strong year.  But this is all not to say that it won’t be affected more in the year to come.  Despite not actually having been hit by the recession yet, the Swiss National Bank has cut interest rates as aggressively as other nations – and won’t necessarily stop short of going to zero.

The continuation of appreciation of the franc will depend on how much of a risk appetite is present in trading.  The world of currency exchange will certainly behave according to world events, and might behave with caution – and carry on relying on the franc for its comforting reliance.


Future of the World Economy

January 29, 2009

If you’re 25 now, take note: by the time you’re heading to the age of 50 and possible retirement, things are going to start getting better in the world economy.  Yes that’s right – start getting better.

The International Monetary Fund have released their new prediction for what is in store for the world, and it doesn’t make for light reading.  The worst hit will of course be Britain – who else?  In the UK, growth will be down by 2.8% which is the worst rate of all developed nations.

This data means that world growth is the worst it has been since World War II.  And things aren’t set to improve until around 2030.  The IMF didn’t have much good to say except that there will be a slight increase in growth in 2010 – to around 3%.

The best foreign exchange rates are likely to be something that require a bit of patience to find….

One person who is hoping to make a significant difference is President Barack Obama who today had his financial stimulus plan passed at last.  The Republicans weren’t happy with it, saying it was far too expensive at $819bn but it will take a little bit of time to see what level of difference the plan will make.

The Future for the Yen in 2009

January 28, 2009

The author is on a bit of a roll these days with concentrating on world currencies.  It is an interesting time for currencies though.  To compare exchange rates may not be everyone’s cup of tea but it is interesting if you look at some of the basics.  So far we have concentrated on the pound, the euro and the US dollar so now let’s have a quick look at the Japanese yen.

This currency has had a pretty strong year compared to others – 13 year highs against the US dollar and a rise by over 35% against the sterling – but as we have seen with the Euro, this isn’t necessarily a good thing.  Japan relies heavily on export, and obviously people are less likely to want to buy from the Japanese if their currency is so much stronger than theirs.  Toyota, the world’s biggest car maker, reported its first losses in 70 years.

The Bank of Japan has also been aggressive in its rate cutting and even reached 0.1%, just shy of zero.  So until they calm down and the market as a whole gets less volatile, things will remain difficult for the yen.  Sure, Japan could ask for assistance from its peers in order to try and weaken their currency, but the US and Europe are very unlikely to want to make their currencies stronger (especially Europe who are already in a situation very similar to Japan).  So perhaps it will be something of a waiting game until things steady themselves out before people gain confidence.

US Dollar Outlook in 2009

January 27, 2009

2008 saw some interesting moves for the US dollar.  It sunk down and then ended the year on a two-year high – pretty volatile stuff.  The money exchange market has certainly been having a nail-biting time as currencies have violently fluctuated over the last few quarters.  Things are not set to calm down for a while yet, so keep the seatbelts buckled and prepare to watch some more interesting moves.  Barack Obama’s plans for fiscal stimulus are still on course, as he recently announced, and the current amount due to be injected into the US economy is $825 billion.  Let’s hope that this gets things going again – the job loss levels in the US are still rising sharply under more job cuts.  Consumer spending is till down.  Obama has labelled the situation as “dire”.

But it is likely that the US will manage to keep its pole position – for starters, surely the only way is up after Dubya’s exit?  And the rate cutting can’t really go any further, and as other countries reach the same level, things are set to calm down.

Euro in 2009

January 26, 2009

So things are still going slightly insane in the UK – today the news that Barclays’ shares have leapt up by 40% after they released an open letter to investors showing how they are in fact experiencing continued health in the relative disaster that is the UK banking sector. Good news for them (and for the investors) but what is happening over with our European cousins?

The author has been less than kind to some of our peers across the pond – see past blog posts – but let’s be serious for a moment and focus on the currency over there. They have so far been enjoying strength in the wake of the ECB’s reluctance to cut rates. While central banks such as the Bank of England and the Federal Reserve Bank have been slashing rates so far that they are almost unable to go any further, in Europe this has not been the case. So you get the strange situation where the Euro suddenly soars…and yet is the only currency doing so. What that means is that exporters get a lot less interest from foreign investors – in Germany they have had to cut production which has driven unemployment up further.  Currency exchange will be fascinating as confidence in the Euro begins to fall.

So in 2009 the ECB will be forced to cut those rates and this will coincide with the other central banks having eased up on this. The Euro will be a lone giant, sitting amongst the rubble of the world recession, having to pick itself up alone. Not ideal given that the world could do with a bit of fraternity in these times. Barack Obama said it, and Gordon Brown followed suit – we need one another to get out of this crisis. The Eurozone has isolated itself and might suffer the consequences. Interesting times.

Recession Official in United Kingdom

January 23, 2009

January.  A time when depression hits hardest, and the end of Winter seems a day that will never come.  Many psychologists have released papers, surveys and ideas about why it seems that moods sink to such low levels during the first month of a year – around the third week is apparently the lowest point.

So really, it’s rather fitting that today the UK is officially in recession.  Yes, we all knew that this was the case, probably since the end of summer, but now it really is cold hard fact.  And more sad (or SAD) inducing is that analysts seem unable to find any positive news on the horizon.  Are they just wallowing or are they really unable to see a better time sometime in the future?

I feel like ruffling their hair and giving them a hot chocolate!  We’ve experienced recession before!  The last time was in the 80s/90s ans yes it lasted around 5 quarters but we picked our way out of it!  There are some who really seem to be enjoying the government’s struggle – although Mr Brown is full of fighting talk today and seems ready to go in all guns blazing.  Mr Cameron is suggesting humiliation like that of 1976 when the then-Labour government had to beg for help from the International Monetary Fund.  He sounds almost like a naughty schoolboy poking fun at Mr Brown’s misfortune.

So now may not be the best time to compare exchange rates – well not if you’re trying to avoid a heart attack – but let us take one minute to think of light.  Summer days, the sounds of bees buzzing, the sun warming your face….doesn’t seem so bad now does it?  Hang in there Britain!

Pound Hits 23-Year Low

January 22, 2009

Things have not started well for the UK currency this year….it has now reached its lowest point against the dollar in 23 years. Many are worried about the state of the UK economy, but is it really worth panicking?  After all, the figures are no worse than was forecast by the government in November.  And even if using public money goes up a large amount, the figures still wouldn’t exceed their projected levels.

So why is everyone freaking out so much?  One investor even said the City is “finished” and that the UK has nothing to sell anymore….is that really the case – is the UK the next Iceland?  Opinions are divided, and many are calling for the FSA to revise its decision to lift the ban on short-selling.  Many are blaming this practise on the spreading fear over the banking sector.  The City minister has even had to calm down the public via the Financial Times, by saying the government does not intend to nationalise the banks.

Mad times indeed but don’t forget to look at cold hard facts and try not to get caught up in the various theories and ideas.  Maybe to buy currency right now would be something to consider carefully…

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