Forex Gump

Strange can be the relationships between different assets and stores of value. In times of a recession one could expect people to be attracted to the yellow metal due to its intrinsic value. However, and strangely too, the sight of a looming recession in Europe has had a contrary impact on Gold.

The last week was witness to rise in global stock markets coupled with a dip in the dollar and the Yen. This seemed to indicate that risk appetite was returning on the back of the rescue packages being put forth by governments all over the world.

How did the actions of subprime mortgage borrowers in the US affect global financial markets and lead to the ongoing liquidity crisis – and will the resulting fallout hurt the wider economy? Here’s a cool interactive explanation of the credit squeeze from FinancialTimes.com.

It seems to be the time when the dollar has begun to defy laws of gravity again. During the last decade, the dollar defied laws of economics and stayed buoyant in spite of a huge and ever widening current account deficit.

The global financial crisis seems to have taken the US by storm. Statements by the US Fed suggest that the nation’s economy is headed for a recession if already not there.Even though, the US announced a US $ 700 billion rescue package, opinion is fast emerging that this may not be sufficient

The US economy is the midst of an economic upheaval and yet the dollar is up. The US Fed cut interest rates to induce liquidity and yet the dollar rose. The dollar’s skewed behavior seems to be a silver lining for the US currency.

The US House approved the massive $700 billion package finally, after having rejected it earlier last week. The earlier rejection of this badly needed package seems to indicate that lawmakers were opposed to using taxpayer’s money to bail out the financial system. But, it appears that after a dose of education and some added sops, the lawmakers changed their stand.

If Karl Marx were alive today, he would have probably winked at Uncle Sam over a swig of Vodka and said ‘If Capitalism brought down the Rouble, your dollar stands socialized today.’

If Freddie Mercury were alive, he would have cheered thousands in his audience in this time of economic gloom just as the Governmental take over of US mortgage giants Freddie and Fannie seems to be cheering the US dollar.

After having taken a beating for nearly six years, the US dollar seems to be getting back its sheen. Factors like the massive US twin deficits and the emergence of the Euro led to a shaky dollar for a prolonged period of time.