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November Best Currency Report

Posted by Catherine Deshayes on Friday, November 06, 2009

Foreign Exchange Specialists Currency Index look at how the Pound is performing against other major currencies as economic conditions change around the world...

The Bank of England has increased its QE (Quantitative Easing) programme by £25bn over the next 3 months - signalling that the UK economy is not out of the woods yet. The UK's reliance on financial services, along with our banks' deep involvement in the issues which caused the credit crisis, mean the road to recovery is long. But how are other countries faring, and what effect has that had on exchange rates?

EUROZONE

Current Rate: 1.1150. Average over last 12 months: 1.1284

France and Germany have already come out of recession - a feat which the UK economy has yet to achieve. The problems in the banking sector have affected Europe less than the USA and UK, so the recovery has been quicker - and as a result the single currency has remained strong, keeping exchange rates low.

For those of you buying property in Europe, the concern is that European interest rates are likely to start increasing before those in the UK. Rising interest rates tend to make a currency more expensive, because investors move assets into that currency to gain a better return, and more demand means a more expensive currency.

So the outlook for transferring money in Euros is not good for the next few months. Perhaps if there is a change in UK government next year, and a quicker recovery than we are seeing now, then things could change, but assuming exchange rates will automatically improve could be an expensive mistake.

US DOLLAR

Current Rate: 1.6611. Average over last 12 months: 1.5452

The US dollar exchange rate has remained relatively good during the recession, primarily because the American economy is the worst affected by the economic crisis. The USA has technically come out of recession now, but continuing market concerns have meant investors are staying away from USD-denominated assets - leaving the currency to weaken (become cheaper).

While rates of $2 are not yet a distant memory, given the overall struggling Pound it is unlikely we will see an enormous improvement in USD rates from here. At 12c above the average over the last 12 months, dollar rates now are attractive for property buyers, who can take advantage and secure exchange rates in advance (forward contracts) based on the current levels.

AUSTRALIAN DOLLAR

Current Rate: 1.8114. Average over last 12 months: 2.0648

Sending money to Australia has become very expensive this year. The Australian economy has continued to blossom, with low unemployment, rising interest rates, and no property slump. Investors have continued to move money to Australia, making the currency progressively more expensive. The Reserve Bank of Australia has already started to put interest rates back up, which usually signals a more expensive currency, and there are probably more rate rises to come.

Elsewhere, other countries have generally seen an increase in the value of their currencies against sterling, to varying extents. For Brits buying abroad, the figures below show the current market rates, along with the averages for the last 12 months.

NEW ZEALAND DOLLAR

Current: 2.2906. Average: 2.5508

SWISS FRANC

Current: 1.6865. Average: 1.7083

THAI BAHT

Current: 55.10. Average: 53.83

CANADIAN DOLLAR

Current: 1.7718. Average: 1.7989

Picture by SteveFE

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