Currency Market Review

The USD weakened against most of the major global currencies in the month of July 2009. The currency market trends were largely determined by the release of key economic data across the regions, and measures taken by the governments to recover the ailing economies.

The USD strengthened in the first week of the month, after data showed that non- farm payrolls in the US declined 467,000 in June, compared to a fall of 375,000 in the previous month. The USD continued to remain strong in the second week of the month, as the US consumer confidence in July dipped to 64.6 from 70.9 previously. In the third week, the USD retreated against higher-yielding currencies, as equity markets gained and after data showed that retail sales in the US rose 0.6% MoM in June. The USD remained range-bound in the fourth week and weakened in the final week of the month, following a general rise in equity markets and release of strong data globally.

The GBP weakened against the USD in the first week on increased risk aversion and speculation that the UK economy would witness a slow return to growth. The GBP further weakened in the second week on expectations that the Bank of England would expand its quantitative easing program. The GBP strengthened in the third week, as risk appetite improved, amid better-than-expected economic data. The GBP was volatile in the fourth week and gained in the final week as risk appetite of investors improved, and after data showed that Nationwide HPI (housing price index) rose 1.3% MoM, better than expected.

The EUR opened weak in the first week of July, as the USD strengthened. The currency traded volatile in the second week. In the third week, the EUR strengthened as the risk appetite improved. The EUR traded volatile during the rest of the month.

The Japanese Yen strengthened against the USD during the first two weeks of the month. The Japanese Yen weakened in the third week, amid a general rise in equity markets. The Japanese Yen remained volatile during the rest of the month.

The USD traded flat against Chinese Yuan and the Philippines Peso during July. The Mexican Peso and Indian Rupee gained against the USD during the first half of the month, but retreated in the later part.