Posted by Allison on 24 March 2009, 10:02
As ever we are seeing plenty of activity in our weekly reports on the state of the currency markets. Those of you who are keeping an eye on certain conversion rates with the help of a currency calculator will no doubt be checking on the figures frequently as the world tries to backpedal from an almost inevitable recession.
It hasn't quite happened yet, but there are certainly plenty of major events happening and a lot of them are having a big effect on the exchange rates between certain countries. And that is what we are going to look at again now, since it's time to take our regular tour round the world to see how the British pound has been doing.
As you will see, it's clear that the pound is not exactly having an easy time of it lately, but we can only hang in there and wait to see when things will start to improve. Will it be this week? The chances are slim, but it's interesting to see how the pattern of rises and falls in the exchange rates continues. So with no further ado, let's take a look at how it performed last week.
The pound actually performed very well against the US dollar the week before, gaining six cents over the week and causing us to breathe something of a sigh of relief. Before that it almost seemed as if the humble pound had gone into freefall.
So with a starting point of 1.6211 US dollars to the pound, let's see what happened next.
As it happened the week didn't get off to the best start, with the pound losing ground by the end of the very first day. By the close of play on Monday it was down to 1.6089. Was this anything to worry about, or would it rally again later on in the week?
Well the next day appeared to send things in the direction of the US dollar, because the pound slipped by another two cents during the course of the day. It finished on 1.5876 – leaving the low sixties we finished on the previous week nothing but a distant memory.
Midweek brought a momentary rally by the pound though. While the Presidential election fever really took hold, the pound quietly gained back a little ground against the US dollar, creeping back up to 1.5957. Was it enough to gain the momentum to push back into the low sixties?
Unfortunately it seemed the answer was going to be no. On Thursday the dollar had re-exerted itself and pushed back again, resulting in a closing exchange rate of 1.5863. Would this be how things would finish for the week, or could the pound pull back a little ground to finish on come Friday night?
Perhaps it was the results of that election that made a difference, or perhaps it was simply that the British pound ran out of steam. Whatever it was, the exchange rate closed at 1.5778 for the week. That represented a 0.0433 loss over the course of the week, wiping out two thirds of the gains we had made the previous week.
So it seems the US dollar still reigns supreme, and it looks likely to do so for some time yet. It is the currency that everyone runs to in times like this, and that is why it is doing well while some other currencies are having a really hard time of it.
So let's leave America with our tail between our legs for now and see whether we were able to put in a stronger performance against the Euro. While every country is having a rough time with the impending recession at the moment, it is clear that some are having a tougher time than others.
The Euro has had its share of tough times recently, and indeed we have often seen that the pound can do well (seemingly) when held up against this particular currency. But in fact it is usually the case that both regions are struggling considerably, and it is merely that one is doing marginally better than the other on occasion.
1.2708 was the exchange rate we finished on against the Euro last week, and that equated to a good result for us, pushing the rate up from the previous week. But as with the US, things didn't go in our favour right from the start.
By the end of trading on Monday, the pound had lost some ground and ended up at 1.2548 against the Euro. The early pattern extended into Tuesday as well, as we saw the Euro aiming to extend its early good performance for the week. The pound finished up claiming 1.2383 by the end of the day.
But again, the pound seemed to be up for a midweek rally here too, as it managed to cling on and push up to 1.2399 by the close of play on Wednesday. That isn't much, but it is a lot better than going into something close to freefall.
But the pattern changed on Thursday. While the American dollar had managed to push back and re-exert itself, the Euro didn't quite have what it took to do the same thing against the British pound. And so we saw an exchange rate that carried on changing in our favour, with the figures pegged at 1.2422 by the end of the day. Again, not a huge difference but anything was worth having by this stage.
The only question now was whether the pound could continue to hang on and pull out another good figure to end on for the close of the week. This was clearly not going to be a week of huge gains on any side as far as the Euro and the pound going head to head was concerned, but anything in our favour would be nice.
So who was it that got the last laugh? As it happened it was the Euro, as we fell back slightly and finished with an exchange rate of 1.2369. That means over the course of the week the British pound had lost a total of 0.0339 on the exchange rate. So perhaps it still might be a while before having a holiday in Europe becomes rather more worthwhile again.
So our next stop as always is Hong Kong, where we did see a small gain last week. That was something to celebrate but whether or not we could capitalise on it and take it into another week was something else altogether.
So how did we leave things last time? Well, on the previous Friday we had an exchange rate of 12.565 Hong Kong dollars to the pound. But once more we weren't getting a good start to the week. By the end of trading on Monday that figure was down to 12.470. Were we going to see a repeat of the pattern that had dogged us already in America and in much of Europe?
Confirmation certainly seemed to come on Tuesday, as the figure slipped lower to close on 12.304. Now at this point the pattern suggested previously that we should expect a rise the following day, and we did indeed get just that. The exchange rate saw a momentary jump to 12.367 by the end of Wednesday.
But this was the point where it would have been nice if the pattern had changed. Because Thursday saw another drop, and the Hong Kong dollar came out fighting again to take us down to a rate of 12.294.
And there was slightly worse to come as well, as the pound limped home on Friday claiming just 12.228 Hong Kong dollars to the pound. Not a good week here either, it seemed, as we lost a total of 0.337 over the course of seven days. That means we lost the gains we made the previous week, plus some more besides.
On that note let's hop across to see if we did any better in New Zealand. The last exchange rate we had here was 2.7814, so we were hoping to repeat the good performance we had put in of late in this country, to get a decent exchange rate once more.
By the end of Monday that old familiar pattern had kicked in again though, leaving us on 2.7401 with a drop of more than four cents in a day. But if we thought that was worth commiserating over, wait until you see what happened next.
Tuesday 's trading brought us a rather different exchange rate by the end of that day, as the pound could only claim 2.6133. That's a drop of nearly thirteen cents in a single day, and seventeen since the end of the previous week.
Things bucked up slightly the next day though, as the pound showed some true British grit by pushing back to claim an exchange rate of 2.6462. But it didn't stop there. Determined to take back some more ground, Thursday's exchange rate finished at 2.6542.
The only question now was whether the pound could keep this up; could it get back some more value by the end of the week. And luckily for us, it did. It surged to the finishing line and managed to close out Friday on 2.6856. That is still a drop of over nine and a half cents on the previous week, but at least we managed to get back some ground after those early losses.
So finally we head to Australia, where we saw a loss of over eight cents the week before. We finished off on 2.4459 for that week, so let's take a look at what happened next.
Well the graph actually looked very similar to the one that was in play for New Zealand. Monday's closing exchange rate was 2.3970, and once again we saw an all too familiar nosedive on the day after, as the pound claimed just 2.2977 Australian dollars to the pound.
So was this the point at which the pound started to get back some ground?
It certainly was. A marginal improvement to 2.3073 the following day got things going back in the right direction, while we saw a bigger leap the day after to 2.3320.
It didn't seem as if we could regain all the ground we had lost previously though, and on Friday the best comeback we could manage was to climb back up to 2.3620. That represents a loss of over eight cents for the whole week – almost exactly the same drop as the previous week.
Not the best week then for the pound. Can we hope for better next week? Or are we stuck with an all too familiar pattern for a while? We'll see.
Despite the fact that the US dollar did well against the pound last week, it wasn't as strong as it has been previously. Much of this was put down to the excitement surrounding the election. It's clear that major events like this can have a real bearing on certain exchange rates.
A survey has predicted that the British pound won't get out of its doldrums against the US dollar for around a year, perhaps even longer. This is perhaps not much of a surprise, given the fact that a recession is edging ever closer and the pound has weakened considerably against the dollar.
The Euro was struggling against the Hong Kong dollar last week too. After finishing on 9.937 on Monday, it crawled home on 9.886 by the end of the week. While the pound had a bad time last week, so did the Euro in many respects.
Reuters is known as one of the world's top news companies, and the UK website is a great place to go for news about all kinds of matters. It also has the stories that affect the exchange rates, and it can be found at http://uk.reuters.com/.
So that's it for another week. We shall be back as usual next week to see whether the pound has held onto its current position, or managed to improve it in any way.
We'll see you then.