Investor Doubts Cool American Exchanges

By: Dr. Mike Campbell

Returning jitters about the strength of the recovery in the US have been credited with knocking 2.5% of the value of the Dow Jones on Friday and are no doubt feeding through into the value of the Greenback against the Yen. Last week, the Dollar hit the lowest value that it has seen this year, closing the week at 86.5692 Yen to 1$ - more than 7.9 Yen below its peak value of 94.4874 which was seen as recently 30^th April.

The slump has been attributed to lacklustre company results and economic data that have emerged in the USA, recently. Part of this data suggests that US consumer confidence has ebbed to its lowest level since August last year – and things were hardly very buoyant then. Market gloom was focused on the financial sector, but not restricted to it. Citigroup and Bank of America share were trading lower as they reported falling revenue. Other stocks to take a hit were General Electric (GE) and Google which saw 7% slide of its valuation. The search engine giant had returned profits below their predicted level for the last three months; the first time it had ever done so. In GE’s case, the market reaction was due to decreased turn-over despite increased profitability.

Market sentiment seems to suggest that the recovery is losing some momentum, but fears of the dreaded double-dip recession seem to have subsided for the time being.

With America as a major trading partner and the Yen trading fully 19 Yen lower than the Japanese PM suggested was desirable when he was finance minister, it remains to be seen what, if anything, the Japanese will do to temper there strong currency. In difficult financial times, the last thing an exporting nation needs is an appreciating currency against one of its major trading partners.