Emerging market currencies hit by risk aversion
Even though equities are rebounding around the world this morning, there is still a great deal of risk aversion on the currency market. And this means that emerging market Asian currencies are being hit in FX trading.
The forex trading forecast for Asian currencies is likely to remain somewhat negative, since many traders will want to wait and see how the global economy does. They also want to make safer plays until the recession ends.
Bloomberg reports on emerging market currencies in Asia:
``Sentiment is likely to remain negative on Asian currencies and equity markets, given concerns over the duration and depth of a global recession,'' said Jimmy Koh, head of treasury research at United Overseas Bank Ltd. in Singapore. See Also
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Sterling finding its footing in forex trading
The U.K. pound is looking for stability in currency trading on the FX market, and it looks as though it may be finding it. Even though things have been rough for the sterling in forex trading, the currency may be finding its footing.
Right now, the FTSE 100 is rebounding on the stock market, and there is hope that the large interest rate cuts made by the Bank of England will help the British economy.
As a result, the sterling is heading for weekly gains against the U.S. dollar and the euro in forex trading.See Also
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Greenback drops a little in currency trading
Yesterday, the U.S. dollar moved higher in forex trading on the currency market as risk aversion sent financial markets heading for safety.
With the U.S. stock market ending rather lower and high yielders like the the down under currencies struggling, the greenback gained more traction in currency trading.
Today, though, the story is a little bit different. Some stability has returned to the sterling in FX trading, and the euro is doing its best to move into the resistance zone.See Also
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Will we see 0% for the Fed?
Will the Fed really be offering free money in the coming months? Some think so. JP Morgan is predicting that the Fed rate will be cut to 0% in the coming two months, slowly inching down in an effort to boost the U.S. economy.
Right now, there is some worry that deflation is about to set in, harming the U.S. economy, and inflation is likely to be used as a counter-strike. However, things may not work out perfectly for the Fed if this happens, reports Bloomberg:
``Taking the target rate to zero percent would not be costless for the Fed,'' Feroli said. Public confidence may drop ``if there is a perception that the Fed has `run out of ammo.'''
Indeed, dropping the Fed rate to 0% might be taken as a sign of defeat. And besides, what can the Fed do beyond that? Sure, it's possible to go negative and start paying people to take money, but that's getting a little extreme (and the scenario is unlikely).
At any rate, the Fed isn't the only country that's getting lower in terms of interest rate. The Swiss National Bank just cut its rate by 100 basis points, and both the European Central Bank and the Bank of England are conceding that they may cut rates.
And don't forget the Bank of Japan. It's practically at 0% already, with a rate of 0.3%.See Also
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The currency trading story changes regularly
One of the defining features of the FX market is volatility. When currency trading, it is important to remember that the story can change rapidly. While this is true of all financial markets, the liquidity of the FX market makes it even more pronounced.
Keep in mind that a currency that may be gaining in the morning may be losing by the afternoon. And because the FX market is a 24 hour market, things can change again by evening and again by nighttime and then again by early morning.
Before engaging in forex trading, it is important to make sure that you understand how the market works, and that you can handle the risk involved.See Also
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