At the end of 2009 we saw the phenomenon of the strengthening U.S. dollar against other major currencies. Is the strengthening U.S. dollar will become a trend in 2010 or only temporary?
U.S. dollar has been depressed long enough for most of the year 2009 due to begin restoration of the economy both in the U.S. or outside the U.S.. Massive stimulus being poured in by the government of the world nations are helping the countries to which its economy slumped out of keterpurukannya. Investors also began to look for and invest their funds into investments that offer a yield greater than the U.S. dollar.
In financial markets, the value of investment products went up. Index stocks, commodities, and currencies with higher-yield, all on the top level. Investor sentiment has grown to be positive for economic recovery.
Data fundamentals that have been released in 2009 showed an increase although it is still not stable. Starting from the European Union area that has begun to advance out of the recession. Germany and France, two countries with the largest economy in the European Union, has come out of the recession at the end of the 2nd quarter, followed by Japan also came out of the recession at the end of the 2nd quarter. The entire European Union have made it out of the recession in the 3rd quarter as well as with U.S. GDP growth in the quarter-3 is remarkable.
With GDP growth was positive and supported with data and other economic fundamentals that had started to improve, now appears discourse when stakeholders begin to exit strategy to withdraw the stimulus.
Australia’s central bank raised interest rates 3 times towards the end of 2009. The total increase of 75 basis points to 3.75 percent. In Europe, the European central bank chief, Trichet was throwing discourse to attract stimulus. And in the U.S. appears the same discourse. Many analysts expect the Federal Reserve will accelerate the increase in U.S. interest rates which may occur in mid-2010 taking into account the conditions of the labor sector that the rate of termination of its workforce began to fall dramatically.
Non Farm Payroll data last showed remarkable decrease in the rate of termination of such employment, from minus111 thousand workers in October to just minus11 thousand workers in November.
Discourse could make the U.S. dollar rose against world currencies. But if the strengthening U.S. dollar will continue in 2010?
In the last policy meeting of 2009, the Federal Reserve issued a statement which is still the same as the previous meeting of maintaining low interest rates for an unspecified time. But the statement is more optimistic than ever before by adding that the economy continues to improve and decline in the labor market has been reduced.
It seems the U.S. central bank is still going to wait for the development of economic data until mid 2010 before deciding to raise interest rates.
The U.S. government until the end of 2009 is also still retain some stimulus, and even extend until the year 2010. Some of the extended stimulus among others, TARP, the housing sector, employment sector, etc.. This shows that the economic recovery is still not stable and still keep the economic risk can be re-entered the hole recession. Reducing high unemployment rate became the main issue in 2010.
ECB also seems to still be maintaining interest rates for a while. In a press conference responding to the decision last interest rate, ECB President Jean Claude Trichet gave no indication to raise interest rates in the near future but it gives an indication to withdraw some stimulusnya.
While England still lagged behind the U.S. and the European union.
UK GDP was negative, which means not out of the recession that may still maintain a loose monetary policy for a longer time. One good thing from England is the data on the number of people claiming unemployment benefits declined sharply, indicating the labor market began to improve.
SNB (Swiss central bank) will attract a stimulus to stop the purchase of corporate bonds in 2010. Many analysts expect the SNB is likely to begin raising interest rates at the end of 2010.
The central bank of Japan (BOJ) is still grappling with the threat of deflation that hit Japan, so the possibility BOJ will not raise interest rates in 2010. Besides strengthening the BOJ is also facing a sharp yen against the U.S. dollar is very disturbing that the Japanese economy largely depends on exports.
BOJ in December 2009 called an emergency meeting to address this and make policies to offer liquidity at 10 trillion yen for the period of 3 months with 0.1 percent interest rate for banks. This step could make the yen weakened against the U.S. dollar.
Australia’s central bank (RBA) which has raised interest rates in 2009 to three times seemed to soften the policy to increase interest rates in early 2010. RBA officials said that interest rates are now back to normal which gives the message to the markets that a rate hike in 2010 would not be too aggressive.
Changes in central bank policy, whatever it is, still waiting for the development of fundamental data on the economy first and second quarter. Increase the stability of the data numbers of economic fundamentals is what policy makers expected to raise interest rates or attractive stimulus.