Dollar Rises Slightly

The US dollar rose slightly Thursday signaling a return of risk appetite for Forex traders and Investors. Another factor cited was the reluctance of the Federal Reserve to purchase long dated treasuries. The Fed also kept interest rates near zero and stated they were willing to purchase long term treasury debt is it would help to thaw credit markets.

Rise in Stocks Helps Dollar

Many Forex traders and investors fear an inflated Fed balance sheet which could cause the Fed to print more money to keep a dismal economy going. The decision of the Fed coupled with a rise in stocks and financial shares helped to bolster the dollar on forex trading markets. The perception that the new Obama administration was moving quickly to address toxic assets held by banks also helped the dollar.

Yen Edges Lower

The Yen edged lower on Forex trading markets as a slight return to risk appetite had Forex traders and investors seeking higher yielding currencies. The Japanese Yen has long been considered a safe haven currency for forex traders and investors and fluctuates because of Forex traders and investors tolerance for risk. The dollar rose 0.2 % to 90.52 Yen.

Markets Volatile

Forex markets have been doing a juggling act lately. Risk appetite and risk aversion are constantly shifting, often shifting daily. Forex trading under these conditions can be stressful for Forex traders. The global economic crisis has caused markets to perform in ways not seen before and each day brings new data that affects Forex and other financial markets. Forex traders have their work cut out for them this year!

Yen Falls in Monday’s Trading

The Japanese Yen has fallen on early Monday trading because of the return of risk appetite in global markets. Forex traders report that a rally in share prices helped risk appetite return and boosted higher yielding currencies. US financial markets are closed for the Martin Luther King holiday and trade is expected to be light.

US Bailouts Calm Financial Sector

In the US, government aid to the financial sector calmed investors and lifted US shares signaling a return of risk appetite. Some Forex traders remained cautious about the sustainability of gains in share prices due to the ongoing global recession. Yousuke Hosokawa, senior manager at Chuo Mitsui Trust and Banking Co. said, “The currency market lacks direction and is moving within limited ranges. Gains in U.S. shares were within the range of rebounds and the U.S. financial sector still faces difficult times.”

Bank of America and CitiGroup Report Losses

Bank of America and Citigroup both reported multibillion dollar quarterly losses on Friday and Citigroup said it would split into two operating units adding to concerns about the US banking industry. Forex Traders were also keeping to the sidelines ahead of President-elect Barack Obama’s inauguration on Tuesday.

Dollar Climbs

The Dollar rose 0.4% from late New York trade on Friday to 91.03 Yen while the Euro climbed 0.7 percent to 121.50 yen. The Dollar Index, or DXY, which measures the value of the Dollar against several major currencies, was down 0.7 percent at 83.587.

Advances by higher-yielding currencies

Forex traders reported advances by higher-yielding currencies such as the Australian and New Zealand dollars which are seen as a measure of risk appetite. The Australian Dollar rose 0.8% to $0.6786 and against the Yen was up 0.4$ at 61.78 Yen. The New Zealand Dollar rose 0.6% to $0.5511 and 0.2% to 50.15 Yen.

New Administration, New Policies

For Forex traders and investors the last two weeks have been exciting with market changes almost daily. The incoming Obama administration in the US is sure to have Forex traders and investors keeping a close watch on markets and how they react to the new policies proposed by the new administration.

Outlandish Claims

We have all seen the advertisements for Forex software that promises huge returns with little or no risk. Never mind the fact that Forex trading requires a lot of education, discipline, and plain old hard work. As Forex trading becomes more popular Forex scams are becoming more common. Beginning Forex traders are often seen as easy marks by scammers due to the fact that the Forex market is not regulated and is international in scope.

North American Securities Administrators Association Warning

The Forex market has been plagued by swindlers who prey on the gullible and the greedy. According to the North American Securities Administrators Association, “In a typical case, investors may be promised tens of thousands of dollars in profits in just a few weeks or months, with an initial investment of only $5,000. Often, the investor’s money is never actually placed in the market through a legitimate dealer, but simply diverted – stolen – for the personal benefit of the con artists.”

Fake Websites

Potential Forex Traders should be aware that anyone can register a domain name and set up a legitimate looking website for only a few dollars a month. Many of these websites have a professional appearance and typically promise huge returns with no mention of possible losses in Forex markets. Forex markets are like any other market and involve both gains and losses.

Many scammers hawk software that promises miracles. A quick Google search will turn up thousands of others making the same claims. Often these scammers are selling software that can be found on the internet for free. A thorough investigation of Forex software is time well spent.

The Case of Russell Warren Brent Cline

Russell Warren Brent Cline is a typical Forex scammer. A former house painter, he set up Orion International in Portland Oregon in 1998. He promised returns anywhere from 60% to 200% with very little risk, because of his sophisticated trading techniques. In 2002 he told investors that he had lost their money due to poor trades (he was a house painter, remember?) and ‘typographical’

errors. It is estimated that 600 investors lost $27 million. Most of the money was spent on luxury cars, private jets, real estate, boats, and an astounding $12,000 for pornography. Cline is currently serving his sentence in a Federal prison.

Investigation is the Key

Forex scams are common and potential Forex traders should investigate any and all offers through the CFTC (Commodity Futures Trading Commission) which has just set up a special task force to deal with growing foreign exchange fraud. A legitimate company will be registered with the CFTC or will be a member of the National Futures Association. Forex trading can be extremely rewarding and many Forex traders achieve great success in currency markets. Use common sense and check out the Forex trader you will be doing business with and get in there and trade!

Downturn in US Economy

The US election has come and gone and the world still faces an economic crisis rivaling that of 1929. The president elect faces the challenges of an unpopular and expensive war and a downturn in the US economy. This year alone the US has lost almost a half million jobs and the national debt is at an all time high. So far the US dollar is holding its own and Forex traders have flocked to the dollar to avoid risk. At present the US dollar is the world’

s reserve currency but what if that changes?

Some Economists Pessimistic

Some analysts and economists are pessimistic about the ultimate future of the dollar citing several economic factors that could contribute to the dollar’

s demise. Some are even going so far as to suggest a total collapse of the dollar.

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Dollar Value and FX Traders

The US dollar has been the world’

s reserve currency since the Bretton Woods agreement reached after World War Two. Most governments maintain currency reserves in US dollars. There are many factors that determine the exchange rate of the dollar and Forex traders are constantly monitoring information from a variety of government and private sources.

The Federal Reserve

Forex traders and economists watch information released by the Federal Reserve which sets interbank lending rates and controls the supply of US dollars worldwide. There are several less well known economic indicators that help to determine the value of the dollar.

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Quiet Trading Election Day

On November 4^th (Election Day in the US) the US dollar was trading steady in quiet trading by Forex traders and investors. Investors and Forex traders were eagerly awaiting the results of the historic 2008 presidential elections. Despite the state of the US economy and fears of a recession the dollar has been holding steady as investors and Forex traders seek a safe haven.

Investors and Forex Traders Shifting Money to the Dollar

The Euro declined against the dollar and the yen and the European Central Bank cut rates from 3.75 to 3.25 in an attempt to help the seriously deteriorating European economy. Central banks around the globe have lowered interest rates to try to mitigate the effects of the worst economic crisis since the great depression of the 1930’

s. One anonymous Japanese trader stated; “Investors have little choice but to shift their money to the dollar as data has almost confirmed that key European economies are heading into a recession. Deep troubles in countries surrounding the euro zone are also making the euro vulnerable against the dollar.”

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Bailout Unpopular

To say that the US bailout was unpopular would be gross understatement. Despite a flood of calls, emails, and letters from constituents both the Senate and the House passed the $700 billion dollar bailout package. Part of the anger was over the millions that executives in failed financial institutions received despite poor performance. When the news broke that AIG executives had treated themselves to a $400,000 bailout party at taxpayer’s expense, demands for curbs on executive compensation were heard in congress.

Politicians Speak Out

Treasury officials have argued privately that banks that receive direct cash infusions should be exempt from the toughest executive pay restrictions. Most politicians disagree. In a letter to Treasury Secretary Paulson, Senator Charles Schumer of New York stated, “Restrictions on executive compensation will ensure that taxpayer money is not wasted enriching the same people whose poor decision-making created this crisis.”It is imperative that these restrictions, including limitations on the incentives for executives to take excessive risks and the elimination of golden parachutes, should apply to any capital injection program.” Treasury officials declined to comment on their position. Many in the US blame Wall Street for the dire economic straits the US finds itself in and fears of a recession have fx traders and investors uneasy.

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Bailout Fails in the House

The failure of the US House of Representatives to pass the 700 billion dollar bailout bill sent shockwaves through world financial markets. The bailout bill is unpopular with most Americans and most politicians are reluctant to go against the wishes of a majority of their constituents. Forex traders and markets were left in limbo and the prognosis for the US dollar is negative despite a slight rally against the Euro earlier in the week.

The Senate Vote

On Wednesday, October 1^st the US senate will vote on the proposed bailout plan with several modifications. The vote will take place after sundown out of respect of the Jewish holidays of Rosh Hashanah. The bill includes a provision raising the FDIC insurance cap from $100,000 to $250,000. The Federal Deposit Insurance Corporation was created by Franklin D. Roosevelt’

s administration in 1933 after numerous bank failures eroded public confidence in the banking system.

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