Dollar Continues to Perform Well

Despite the inaction of the G20 summit the dollar continues to do well on Forex markets indicating the telltale signs of continuing risk aversion by Forex traders. The G 20 (Group of Twenty Finance Ministers and Central Bank Governors) met over the weekend in Washington to discuss the global financial crisis and what regulatory solutions could be taken to prevent future crises.

G 20 Promises Bold Action

The group, which met for less than six hours at the National Building Museum, promised bold action in several areas including increased oversight of financial markets, reform of the International Monetary Fund and the World Bank, and urged governments to implement fiscal policies to stimulate growth. The group left most of the difficult decisions for future meetings. A final statement issued by the group stated, “Against this background of deteriorating economic conditions worldwide, we agreed that a broader policy response is needed, based on closer macroeconomic cooperation, to restore growth, avoid negative spillovers and support emerging market economies and developing countries.”

Free Markets to Continue

Despite philosophical differences one of the only agreed upon conclusions was the continuation of free market capitalism. Brazilian President Luiz Inácio Lula da Silva called on the larger members not just to lend money as a band-aid to financial troubles, but to continue with policies which bolster growth and increase trade as a healthier solution to the recent economic crisis.

Dollar Rallies After Slight Decline

The US dollar is regaining its strength after a slight decline on Forex markets last week and continues to provide investors with Forex opportunity. The dollar continues to gain against the Euro which continues its decline on Forex markets. Forex traders have experienced volatile market conditions since the global crisis began and have been watching the G 20 summit with intense interest.

Dollar Gains Against Yen

The dollar has also gained against the high performing Japanese Yen in forex trading. The Japanese economy is in serious trouble and lower demand for Japanese products has caused the Japanese economy to contract and has affected the Yen in FX trading.

Forex Traders and the G 20

While the G 20 summit did little to calm troubled markets it is seen as a first step towards a global economic agreement. Uncertain economic conditions have caused Forex traders and investors to monitor economic data from around the globe with unprecedented intensity. The G 20 summit is only a small step towards stabilizing the global economy.

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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Forex Traders and the US Dollar

The recent plan by the US to buy 700 billion dollars worth of toxic debt from US banks has thrown Forex markets and traders into a state of bewilderment. With rising oil prices and an unresolved presidential election the future of the US dollar is uncertain. Although banks made temporary gains fx traders and investors are concerned because investors are concerned about the price at which banks may have to sell their assets.

Forex Trading, the US Dollar and Politics

Investors and Forex traders worldwide are waiting to hear the details of the bailout which are unclear. Another complicating factor is the political nature of the bailout with the Bush administration and congressional Democrats differing on who and what should be bailed out. Said senate majority leader Harry Reid of Nevada, “The Bush Administration has called on Congress to rubber stamp its bailout legislation without serious debate or efforts to improve it. That will not happen.” To complicate matters even further some senate Republicans are calling the Bush plan ‘Totally Unacceptable.”

Congressional debate on the issue is expected to last well into next week.

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