Summary Of Currency Markets For October 13th – October 19th

Posted by Allison on 24 March 2009, 09:59

Last week was a week of extremes.  After plummeting like a stone against the US dollar, and not doing much better against the Euro and the Hong Kong dollar, the British pound put up a great performance against the New Zealand and Australian dollars.

This was just one indication of how turbulent and torrid the money markets are at the moment.  The woes of the banks all around the world and the effects the economy is having on everyone can certainly be seen in the results we got last week.

So will this week's report see more of the same?  Or will things have stabilised somewhat?  It's true to say that the last round up of news we gave you was probably one of the most eye opening ones we've had in a long time, but these are surprising times, so we need to bear that in mind.

And on that note, it's time we took a look at the latest developments, starting as we always do with the head to head between the US dollar and the British pound.

An overview of the currency markets for October 13th – October 19th

Well as it turned out, this wasn't going to mirror the previous week, where the word 'plummeting' could have been used over and over again to good effect.

This time we had plenty of ups and downs to take in – although the downs were still the most prevalent of all.  If you were expecting that currency converter to show you better figures than it did last week, you may still have been disappointed.

At the end of the previous week the exchange rate had dropped to 1.7016 – leaving the pound at one of the lowest rates it had been at for quite some time.  But while the thirteenth is supposed to be unlucky it certainly wasn't for the British pound.  By the end of that first day of trading, it had recovered some ground and gone up to claim an exchange rate of 1.7365 US dollars to the pound.

It was a good start, but these times are calling for cautiousness, and there was still little reason to celebrate given the overall situation we find ourselves in.  So on Tuesday we watched to see what would happen next – and we were rewarded with another improvement for our efforts.  The pound had leaped up again to finish at 1.7607 for the day.

It seemed unthinkable though that this could carry on; an improvement of nearly six cents over just two days couldn't be sustained surely?  As if to confirm that fact, Wednesday brought things to more of a balance again, as the exchange rate dipped back down to 1.7554.  Not much of a dip though, so was there any chance that we could keep the US dollar on the back foot for the rest of the week?

It seemed the answer was no.  Thursday brought a more sustained push by the dollar to regain some ground, and by the close of trading the exchange rate had fallen back further to 1.7258. 

Some kind of last minute surge by the pound would have been nice to close out the week, but it managed just a tiny increase to finish on 1.7293 by the end of Friday.  That still represented an increase over the whole week though – rather more satisfying than the previous losses we have had to nurse.

All in all, the British pound managed to gain 0.0277 over the US dollar during the course of the week.  Although given the two huge gains to begin with, the losses in the latter half of the week almost made this overall gain invisible.  What will come next, we wonder?

We'll find out next week, but for now let's press on and take a look at what happened against the Euro.

Last week we finished with a rate of 1.2531, representing a smaller loss over the whole week than we'd had against the dollar.  But could we actually turn a loss last week into a gain this week?

Monday started off in the right direction as we claimed an exchange rate of 1.2732 by the close of trading.  And that did in fact increase the next day, as the pound put pressure on the Euro to finish up slightly at 1.2803.  Anyone involved in Forex trading would no doubt have been watching this currency pairing very closely indeed.

Wednesday saw another gain, although this time it was only a small one as the pound exerted more pressure to finish on 1.2884.  Could we continue for another two days – or would this be the turning point?

Well it was a turning point of sorts, but luckily for us it didn't matter too much in the end.  Thursday saw the Euro battling back and knocking us down to 1.2777.  But the fight back didn't last long at all.  Because by the close of trading on Friday night, the pound was claiming 1.2901 Euros – representing a total gain of 0.037 since the same point last week.

The Euro has always seemed to be a little more volatile than the US dollar when it goes up against the pound, so this was not perhaps as surprising a victory as it could have been.  Just as the pound gets a good week, the Euro gets a bad week, and vice versa.  It seems to happen a lot.  We'd be more impressed with a continued fight back against the US dollar – but we might need to wait a while to see that.

So let's leave Europe and head over to Hong Kong, to see how the pound performed over there.  We didn't do very well last week, with a total loss of 0.515 over the week.  So could we pull out a better result this time around?

We were left on an exchange rate of 13.204 the previous week, and by the end of Monday we'd pushed back to claim 13.479 Hong Kong dollars to the pound.  A good start – but we've seen strong starts being crushed to pieces before, so we are a little more cautious at the moment.  What would happen next?

Tuesday brought more good news though as the rate went up again to 13.667.  That was something to be pleased about, but you had a feeling that things would start to even out again any time soon, and they did. 

The following day saw a slight fall back to 13.620 – not too much to worry about but an indication that we shouldn't get too comfortable with a constantly increasing exchange rate.  And in fact the events of the next day proved this beyond any doubt.

Why?  Because by the close of play on Thursday that exchange rate had gone back down to 13.383 – still above the closing figure of the previous week but dropping quite a bit on the highs of the past couple of days.

So where would we finish?  As it happened we did put in a final burst of enthusiasm, and finished the week with an exchange rate of 13.413.  This was 0.209 up on the week before, so for once we had a gain to celebrate.  And in the current climate that is really something to take note of.

Next we move on to New Zealand, where the amazing events of last week left us an incredible 0.1772 up on the week before.  Surely we couldn't see more of the same two weeks running?

2.8417 was the starting point on Monday morning.  And by the time everyone packed up and went home that night the figure had gone up again – this time stopping at 2.8712.  Surely this couldn't carry on?

It couldn't – as the next day brought a redressing of the balance.  The exchange rate fell to 2.7839, which was a big drop over the course of a single day, but given what happened last week perhaps not so much of a big surprise.

Following that we did manage to pull back some ground the following day though.  A quick jump saw the pound claiming 2.8015 New Zealand dollars by the close of business.  And we managed to pull off the same trick the next day as well, finishing on 2.8268.

Could we do the same again on Friday?  Unfortunately for us the answer was no, but we didn't lose too much ground, as we finished on 2.8192.  That represents a loss of 0.0225 over the whole week, but that's not too much of a loss considering how much we gained the week before.

So how did we do in Australia?  Quite often we have found that whatever happens in New Zealand can be mirrored to a certain extent in Australia, and that was certainly the case last week.  So after the big gains we saw then – more than thirty cents in total – could we expect big losses this week, or would we hang on to most of them just as we did in New Zealand?

When we left it, the pound was worth 2.5736 Australian dollars.  By the end of the first day's trading it had edged up slightly to 2.5872.  But could we expect a similar dip to the one we had seen in New Zealand?

We could.  Just twenty four hours later the rate had dropped to 2.4410 – losing a massive fourteen cents (and then some) overnight.  But there was a leap in the opposite direction a further twenty four hours after that, as the pound climbed back up again to 2.5215.  What would happen from here on in?  Could we inch forward again just as we had in New Zealand?

Close of play on Thursday brought the answer, as we finished on 2.5577.  We may have regained a little ground there, but we lost it again on Friday as we closed out the week on an exchange rate of 2.5308.  That means we lost a total of 0.0428 over the course of the week – although this barely made a dent in the huge gains of the week before.

So it was another huge week for the pound, as it battled on with all the major currencies of the world.  And we can surely expect more of the same as the world economy continues to struggle over the coming weeks.

Notable events in the world of currency


Is the yen coming out on top?

Some currencies are certainly struggling more than others at the moment, but it seems as if the yen isn't one of them.

After a sharp drop at the beginning of the week, it soared back into control against the US dollar.  The threat of a recession in the US is partly to blame.

Is the won winning?

The won, the currency of choice for South Korea, has been having a rough time of it lately.  It managed to repair some of the damage caused by the worst fall in its exchange rate for ten years, but it is not out of the woods yet.

In the end, only time can tell whether it will become a prolonged victim of the world economy.

How safe is the US dollar?

Keep an eye on it in the coming weeks, because it may just prove to have a weak side after all.

The US dollar has remained quite steady in the chaos going on around it, but some think it could fall flat on its face sooner or later.  Would you bet on it happening?  We will keep you posted – just in case.

So there we have it for another week.  What more will happen in the next seven days we wonder?  There's only one way to find out – stay tuned and we will provide you with our usual seven day round up at the same time next week.

See you then.