The dollar has been steadily climbing against most other major currencies in the last few weeks. The greenback is certainly not making miraculous gains but it has held firm and pushed back against rough economic odds. The $789 economic stimulus plan finally went through Tuesday (February 17), but investors did not appear impressed as the Dow dropped by nearly 300 points.

One dollar currently fetches 92.3 yen. This is the high point for the dollar since it reached 94 yen in early January. The dollar had been as low as 97 yen during mid-December and it fell again to 88 yen after peaking in early January. The rise back to the current position, just 4 pips higher, has been steady.

Although the dollar has been up against several other major currencies, the climb against the yen has been largely due to terrible economic conditions in Japan. New forecasts out of Japan predict the worst drop in gross domestic product for that country in about 35 years. In essence, currency ratios are being built based on a battle of attrition in the current speculative market. The US is in bad shape, but many European and Asian countries are starting to show conditions that are at least as poor.

The Euro is actually nearing its medium-term low against the dollar. One Euro currently nets just under $1.26. In November, the Euro fell to around $1.25 before firmly bouncing back up near $1.44 a month later. The Euro reached its all-time high above $1.61 in mid-2008 before beginning its sharp drop, largely in conjunction with the fall of oil. Some leading banks have forecast a Euro worth $.95 by the end of 2009.

The British Pound is down over 60 pips from its all-time high at $2.06 from late 2007. Cable has actually held steady for a few weeks after the Pound fell below $1.40 for a while. One Pound currently fetches $1.425.

Worldwide economic concerns still persist and many believe that with no currency standing tall at the moment that gold is the bet for safe investors. The current spot rate of $967 per ounce seems to reflect this logic. Gold has increased in value for 8 consecutive years with an average annual rate of return around 16 per cent. The precious metal has climbed about $60 in less than a month and definitely appears poised to test its all-time high near $1,020. Goldmoney.com’s James Turk thinks a much higher point is in reach. He has speculated that $8,000-$10,000 is within reach by 2013.

There is no doubt a discovery of a new gold hot spot would draw a crowd in the current economic climate. The global crisis is likely to continue for some time. President Obama has made several comments in the last few days advising Americans to be patient and realistic about expectations for the stimulus package. This request is partly to blame for investor’s lack of enthusiasm for the bill.

Many more companies have announced layoffs the last week and GM and Chrysler are already asking for more money. Leaders for the two automakers pitched for another $14 billion in assistance just two months after their previous request. Conditions are worse in autos and Americans are still waiting for a dramatic sign of any economic bottom.

Market Recap

Monday was President’s Day in the US so all the major financial markets were closed. This gave an extra day for anxious Americans to wait to hear more details about the finalized economic stimulus plan. The anxiety turned to panic Tuesday as the Dow dropped 297 points. The NASDAQ and S&P were 63 and 37 points. GM and Chrysler asked for another $14 billion in government aid. The dollar is up against most major currencies.

Neil Kokemuller
9:02 PM EST
Tuesday, February 17, 2009

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University.

Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.