As in the previous month, the value of the US dollar continued to increase. The monthly average from May to June saw it rise compared to all major currencies with the exception of the yen. The US dollar rose by 2.1% versus both the euro and the Swiss franc, while it gained 2.3% compared to the pound sterling. Only against the yen did it face a decline, falling by 0.5%. The level of the euro versus the US dollar seems to be still relatively well established around $1.25/€. But itmoved somewhat below this at the beginning of July, when it stood at around $1.23/€.
The current process of finding a solution via further emergency funding in the Euro-zone to support the banking sector and the ailing peripheral economies might push the euro back as some confidence into the currency again could re-emerge.
In general, the near-term development will to some extent depend on the successful outcome of the newly implemented structure of the European Stability Mechanism (ESM) and the current bail-out of the Spanish banking sector. Similarly interesting is the recent development of the yen to US dollar relationship, which again fell below the critical ¥80/$ level and was trading above this for some days in the second half of June. It remains to be seen if the Bank of Japan (BoJ) will continue to support the yen’s weakening in the foreign exchange market, given that the yen has been trading at this relatively high level, which is hurtful to exports, since the beginning of May. In nominal terms, the OPEC Reference Basket continued falling sharply by $14.09/b or 13.0% from $108.07/b in May to $93.98/b in June. In real terms, after accounting for inflation and currency fluctuations, the Basket price fell by 11.9% or $7.92/b to $58.87/b from $66.79/b (base June 2001=100). Over the same period, the US dollar rose by 1.3% against the import-weighted modified Geneva I + US dollar basket while inflation fell by 0.1%.