Currencies feel the effect of Hurricane Katrina

Currencies feel the effect of Hurricane Katrina

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Analysts advised caution in currency trading on Monday due to the global effects expected from Hurricane Katrina, one of the largest storms that has ever hit the United States. Still trade was lively despite the closure of UK markets for a bank holiday. The UK accounts for about one-third of all activity in the currencies trade.

The dollar was trading at ¥110.5 in relation to the yen in New York at late morning. It had been at ¥109.9 in Asian markets. It was said that the yen could begin to have trouble if crude oil rises above $75 per barrel. Prices rose above $70 per barrel in Asian trade on Monday due to concerns about the effect of Hurricane Katrina on Gulf of Mexico and Gulf Coast oil productions and refining facilities.

The US dollar was also up in relation to the Canadian dollar, trading at C$1.1948 after having been a bit lower at $1.192 earlier in the day in New York trade. The Canadian dollar was slightly weakened on profit-taking after recent gains based on Canada’s oil sands reserves.

The Indonesian rupiah was also lower against the US dollar, trading at Rp10,640 to the dollar, a new 4-year low. The OPEC member is a net oil importer which, along with other economic problems has caused the rupiah to decline in value during the year.

The euro was down to $1.227 in relation to the US dollar in New York, as investors evaluated the relative influences of higher interest and more US interest rate hikes against the effects that Hurricane Katrina might have on economic issues.