Dollar May Extend Gain as Bank Losses Spur Demand for Safety

Sandra Fickweil

04-20-2009

10:57

The article talks about the rise and fall of several currencies in different countries compared to the American dollar.

According to the article, the yen has risen to the highest level in more than two weeks, and the euro has dropped against the dollar on speculation disagreement. Benedikt Germanier who is a strategist in Stamford, Connecticut, at UBS AG said that they favoured the dollar and then the yen and if they did not get a depression scenario, they were in a deep recession.

The highest level of the dollar since March 16 was in the morning in Tokyo to 1,2889. The yen on the other side was at 126.50 per euro, and "Japan’s currency fetched 97.95 per dollar, after rising 1.3 percent".

According to the article, the Swedish krona fell also for a fourth day versus the euro, decreasing 1.9 percent, to the lowest level since March 12.

The UBS recommended its clients to sell the Swedish currency against the dollar, as they predicted a decline.

Concerning bank shares, Bank of America dropped 24 percent the day before the article was issued because rising charge-offs for uncollectible loans overshadowed better-than- estimated earnings; and the Citigroup decreased about 20 percent after Goldman Sachs Group Inc. said that the bank’s credit losses were growing very fast.

The euro is still dropping and according to Germany's central bank, the contraction in Germany was declining a lot in the first quarter of 2009. Vassili Serebriakov, a currency strategist said: "You have to love to hate the euro". He also predicts that the euro will decline to $1.20 by the end of the year.

Furthermore, not only the euro-dollar pair but also the S&P 500 Index had a correlation of minus 0.37 over the past month. According to Ruskin, investors should sell the euro on "upticks" because the ECB will abandon "monetary orthodoxy" and use unconventional measures to spur growth.

The text talks a lot about the effects of the global downturn and how this can be seen at the different currencies. I think it is very interesting to get an insight of the ups and downs of countries' currencies instead of only looking at the numbers of export, import, or GDP. The article illustrates the effects of the economic difficulties affecting the Japanese yen, the European euro, the American dollar, as well as the Swedish krona. Although the article was quite hard to read—due to the many numbers and figures—it provides a brief overview of the actual situation of the most important currencies worldwide.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aV60sP7N.6Bg&refer=home