Of the G-10 countries from a FOREX standpoint, what is the strongest and weakest economy?
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This entry was posted on Wednesday, January 27th, 2010 at 10:37 am and is filed under forex trading. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
January 27th, 2010 at 10:37 am
US Dollar (USD) is under a lot of pressure. FED printed a lot of money in the last two years to ward of the recession and save a lot of banks and financial companies from bankruptcy under TARP. This increase in the money supply is going to be inflationary in the long run. Inflation means USD will depreciate. Inflation is not good. Many investors try to take refuge in safe haven assets like gold. So you might have heard that gold prices are at their historical peak. Gold is known as anti dollar. Meaning gold and USD have an inverse relationship. So USD is weak.
British Pound (GBP) is also weak and expecting a depreciation. British economy has not performed well in the last two years. European economy is out of the trouble but British economy is not. So another G-10 currency is GBP.
Japanese Yen (JPY) has gone strong. The reason was JPY was considered to be the best carry trade currency since interest rates in the Japanese economy were almost zero in the last decade. Last year, suddenly carry traders lost appetitie due to rise in interest rates and started unwinding their short position in JPY. This massive buying of JPY made it appreciate.