Forex Gump

With the turmoil in the global economy and currency markets, a trader needs to find a safe haven for his hard earned profits. Let’s evaluate if it is time to go long on the Yen, which may be considered a safe bet, though with low yields.

The US economic contagion seems to be finding its way far and wide. New Zealand’s economy seems to have been hit worse than others and it may already be in recession.

In one of my previous articles on an economic and monetary union, we had discussed the possibility of the Eurodollar becoming a future world currency. Let’s explore this fanciful idea further and reason out the pros and cons of such a currency and what experts have really proposed.

The emergence of the Euro and the recent decline in the US Dollar vis-à-vis key currencies does not seem to bode too well for the long term prospects of the Dollar. The Dollar has lost nearly 50% of its value against a trade weighted basket of currencies since 1985

An Economic and Monetary Union is a union of two or more economies or markets to form a single market with a common currency. It is considered the fifth stage of economic integration. The largest Economic and Monetary Union at present is the European Union.

Most currency traders must already be familiar with the concept of currency carry trade. However, it is important to understand the risks involved in this form of trading vis-à-vis the high returns that it seems to promise, especially in the context of the fluid forex markets of today.

We are all probably aware that inflation leads to an erosion in the value of a currency. Then how can inflation in the Euro zone prop the Euro! The seeming conflict has a short term vs. long term connotation.

Fiscal policy may broadly be defined as the governmental policy that influences the economy via the tools of taxation and government spending. By utilizing the various tools of fiscal policy, governments can affect economic activity, aggregate demand, resource allocation and income distribution.

Exchange rate systems can be classified under the two broad categories of fixed and floating rates. In real life, exchange rate mechanisms are a mix of these, with some countries having abandoned exchange rates completely due to macro economic crisis.

That’s a billion dollar question. Let’s analyze the signals and economic environment in a comparative global context to see if the dollar trough is here or if there is room for it to depreciate further.