The dollar has become so weak again that it has begun to fade even against the lowly Yen. The greenback and the Japanese currency seem to be effectively fighting for the label of least desirable currency at the moment. One dollar is currently (May 26) netting 95.40 Yen.

Despite a surprising strong consumer confidence reading that marked a high point for sentiment since September, data still shows people aren’t spending to match their confidence. Why? There are still 8.9 per cent of people dealing with unemployment, and more expected when the May number is released. Analysts say 9.2% is likely. Housing prices are also still slumping.

The real question is what are consumers so confident about? The answer is fairly simple according to many economists. Consumers aren’t going to spend money because they are hopeful conditions are good or improving, they will spend when data and economic performance confirms things are good.

What this all means is that the value of the dollar is still not measuring up. While having a buck in domestic circles may still be worth something, the lack of success in housing and jobs has made other global currencies, along with oil and gold, more sought after in speculation.

GM is apparently on the verge of bankruptcy, or at best, a financial restructuring. Chrysler is also driving on fumes. With the American auto industry in shambles, more consumers are putting their auto dollars into foreign made cars. Reputable Japanese car makers are among those taking on gains from the Big 3 losing out. It might seem hard to imagine, but this one powerful industry certainly is having an impact on currency speculation and the movement of the Yen against the dollar.

The dollar was up to 101 yen in early April but it has been on a steady decline since. The dollar-yen ratio touched down through an important near-term support level May 21st when a dollar dipped to near 94 yen. This marked a two-month low point.

Speculators that follow technical charts are likely betting more downward movement in the near and medium terms for the dollar-yen. The 50 day simple moving average seems to put a near-term cap around 98 Yen on the dollar, but the next sturdy support levels appear to come in farther down in the low-90s Yen range. The 52-week low of 87.11 Yen might be in jeopardy not the far into the future if the current trend continues.

Interest yields appear to be settled in at low rates for some time. The Fed has made no comment or indication suggesting a chance from its zero per cent basis funds rate anytime soon. This lack of yield motivation, combined with still unproven economic indicators, might keep the dollar from retesting the Yen century mark soon.

Neil Kokemuller
10:17 PM EST
Tuesday, May 26, 2009

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University. He is also in house stock market commentator at Live Charts UK, where you can find real time charts and share prices .

Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.