Summary Of Currency Markets For April 2008

If you remember, last month was quite a turbulent one for the currency markets, and the dollar in particular.

In March the story was very much about the fall of the dollar, but was April the same?

An overview of the currency markets during April

The dollar began the month at around $1.56 against the Euro, and after a slight drop in value to the 3rd April it rallied to a high for the month of around $1.59 on the 16th.  It then dipped again before regaining the $1.59 position on the 22nd and 23rd.

Americans would have been forgiven for feeling rather relieved at this, given the fact that March held so much doom and gloom for them.  All we really heard about the month before was the weakness of the dollar and the power of the Euro, so any gains made in April were always going to be hard fought and happily won.

Unfortunately the heady heights of the dollar's $1.59 position didn't last; in fact it ended the month in a worse position against the Euro than it started.  By the time the 30th April came to a close Americans were back with a dollar that was worth a mere $1.55 against the Euro.  Perhaps America's troubles are not over just yet.

But how did the British pound fare?  It too seemed to have a turbulent month against the Euro, although not to the same extent as the dollar.  A single pound was worth 0.788p against the Euro on April Fool's Day, and unlike the dollar you wouldn't have been a fool to bet on it becoming stronger as the month went by. 

The pound managed to break through the 0.80p barrier on the tenth, and largely held that position of renewed strength until the 23rd, almost two weeks later – despite having dipped down to 0.79p occasionally it always managed to regain it.

Even though the pound didn't manage to hold onto that value for another week to see the month out, it did stay over the 0.79p mark, which at least looked a little more promising.

So far we have seen something of a struggle for these two major currencies to stay ahead of the Euro – or at least put up a respectable fight against it – during April.  But if we take a look at what happened when the dollar and the pound went head to head last month, the image isn't one of a titanic struggle where neither party would give more than an inch; it is one where nothing much actually seemed to happen.

The dollar started out at fifty cents against the pound… and it stayed there, virtually all month.  While there was a little variation – from 0.501c to 0.508c to the pound – these two currencies actually stayed at level pegging for the whole of April.  The most exciting thing to happen was the temporary dip between the 4th and the 6th of the month, when it slid down to 0.4996 – just about as tiny an amount as you could get between the two currencies.

So it seems that the dollar is starting to rally somewhat, but whether this will continue into next month remains to be seen.  One piece of good news though – last month we saw the dollar slip below the 100 yen mark, but it fought back in April to stay above 100 yen every single day, and in fact it finished with a flourish as the value hit the heady heights of 104.64 yen.

Is this the start of the dollar seeking its former position as a currency to be reckoned with?  Come back next month to find out.

Notable events in the world of currency in April 2008

 

Royal Mint releases brand new designs for British coinage

This was one of the more delightful stories back in April, which got off to an interesting start for the UK as everyone got to see the designs which are unlike anything we've ever seen before.

The Shield of the Royal Arms may be quite well known by Brits (even if they didn't all know that is what it was called) but they certainly wouldn't have seen it looking like this before.

Apparently the pound coin was originally going to remain unchanged, but in light of the winning design it too was overhauled to display the complete Royal Arms on its reverse.

Why complete?  Because every one of the other coins will now show a portion of the Royal Arms off centre of the actual coin itself, so that when the full set is laid down in a certain way, they will depict the shield in its familiar shape.

While some purists dislike the new designs (some have objected to Britannia disappearing from the 50p coin) most people seem to like them and even now some Brits are eagerly checking their change to see when the first few coins reach them through the natural circulation.

Whatever you might think of the designs personally, there is no doubting that people haven't been this interested in British coinage for many years.

Are things looking less certain for the Eurozone?

Things started to look a little more interesting last month for all the countries in Europe, since there appears to be something of a wedge dividing the countries into two broad groups.

While some countries including Britain are struggling to find their way through the current troubles and the ever present threat of a recession of some kind, other countries look almost as if they haven't been affected at all.

Germany seems to be going from strength to strength for example, with its unemployment levels dropping yet again.  So far they are on a downward trend for people being out of work that has lasted a whopping twenty seven months in a row.  Far from being worried about job losses and a falling economy Germany is bucking the trend which is spreading like a disease around many other countries in Europe, spreading from the weakness of the dollar and the various problems which have beset the US in recent months.

Will Germany remain as the 'last man standing', retaining its current strength while all around them Europe struggles to remain even on its knees?

Manufacturing in Italy has taken a nosedive, and it's not the only country to suffer this fate.  Meanwhile Germany has improved.  It just goes to show that while a country's currency has a lot of bearing on how the market moves forward, it can be seen and felt in other areas too.

Signs of a forthcoming recession?

Data released during the second half of the month didn't bode well for anyone living in Britain.  While this country may not be the only one going through its struggles with the economy it certainly shows how depressing things are in general, with house prices continuing to fall and showing no sign of regaining any of their earlier value either.

With the events of the global currency markets of late, it's hardly surprising that the feeling of uncertainty in the future is starting to show up in the spending habits of the general public.  People are starting to hang on to their purse strings, and who can blame them given the fact that they feel their jobs are starting to look less certain.  The UK may well follow in the footsteps of the US in that many companies may start to prevent their staff from working any more than their contracted hours – reducing pay in one fell swoop in these uncertain times.

Australia's economy looking fragile during April

The current weakness of many currencies and economies is something that we are all starting to get used to reading about, but some countries seem to be more apt to get dragged down by whatever is going on in the mighty United States of America than others.

Australia is a prime example.  While it may be a long way away geographically, it soon feels the effects of whatever is going on in the USA, just as many other major countries do, and the Australian economy is looking rather fragile at the moment.  It seems that seventeen good years are about to come to an end, though no one is quite sure when.

The people most worried are those who are creeping closer to the reality of losing their homes, thanks to the increasing interest rates and the rising prices that are making it even harder to make ends meet.

But while Australia's future looks uncertain, we can be sure that it's not the only country wondering what the next few months will bring, let alone years.

A global recession?

Many people are playing down the idea of a recession, while others think that it is only a matter of time until the largest world countries get dragged down one by one.

It might seem to be a pessimistic attitude, but with house prices in many major countries around the world falling and the value of some currencies struggling to regain the strength they had a while back, it is hard to conceive that it isn't at least a possibility that we could all be facing tougher times ahead.

While some of this is merely doom and gloom with no firm foundations on which to base it, April did see a comment coming from the International Monetary Fund which was hard to ignore.

The IMF believes that there is a one in four chance that the problems which started all this – namely the dire troubles in the US housing market – will see the entire world following them into a recession.

This news did make many people sit up and notice, purely because of where the prediction came from.  This has given new grist to the mills of those who are feeling understandably pessimistic about the future; hearing people in general talking about the possibility and hearing people from the IMF talking about it are two very different things.

One thing is certain though – the troubles besieging America at the moment don't look set to ease any time soon.

Looking ahead

So what did we learn during April that we didn't know previously?

The main lesson was perhaps the fact that although a particular currency can regain a little of its previous strength – a case in point being the US dollar – that doesn't automatically mean everything else within that country regains its strength too.

Far from it, in fact.  While the dollar continues to struggle in order to claw back some of its power, the problems in America's housing market show no signs of getting better. 

It seems that many of the developed countries in the world – Australia and the UK being two more good examples – are finally starting to feel the consequences of being too frivolous with their spending during the good years when credit was easy to get and cheap to pay for.

It's only now when things are starting to turn downwards that people all around the world are paying the real price of taking on more credit than they can handle.  If interest rates rise as they have already done in some countries, there is every chance that the happy go lucky credit years will turn into the biggest 'buy now, pay later' event that the world has ever seen.

Some people have mentioned the Great Depression in the same sentence as talking about the current credit crisis.  In reality though, the effects of a depression now could be even worse, because widely available credit wasn't something that was available during the years of the Great Depression.

The world as a whole could indeed be about to wake up to the biggest boom and bust cycle it has ever seen – and while all that lovely credit might have seemed like a good idea at the time, everyone has to pay up eventually.

The biggest problem is that the cost could be dearer than anyone imagined.