Economic Indicators Affecting The High Yield Forex Investing.
Not every day can you observe with your own eyes, as the currency markets gyrate under the influence of external factors and start to play by the rules of the New Economy. On the other hand, one of those days occurred on February 3 this current year on which morning the European Central Bank raised interest rates by a quarter point, Eurocurrency behaved contrary to the established patterns of behavior. Instead of growing, the Euro fell down against the US dollar. But when that same day, it was reported that the giant British company, which operates in the mobile market, Vodafone Airtouch PLC made a victory over their rival Mannesmann, and is going to donate to the latest over 183 billion dollars, the European currency had immediately played up to the whole 2 and a half cents to the level of 99.5.
For the forex trade investors this was a very significant movement on the euro / dollar ratio as it was probably the most impressive evidence that traders use the Forex market is now using the completely different keys to find the answer, in which currency to invest. Previously, for a long time strengthening or weakening of the currency in the short-scale depended on the acts of central banks to raise or lower interest rates. Such a solution has directly determined the attendance or absence of foreign investors’ appetite for government securities of that country. As the currency strategist from JPMorgan & Co., Alfonso Prat remarked, the most sophisticated investors have always used the bonds for the game on the difference in interest rates. For example, in the early and mid-80′s the position of the dollar had been improved rather steadily. This happened because the record high U.S. interest rates have drawn in billions of dollars of foreign investors who have donated in their US Treasures. Certainly, long-term trends in economic development, as well as its investment story, after all, reaffirm their influence on the exchange rate. But in the short run the expected direction of interest rates was the main information for traders to make a decision about buying and selling currencies.
In the last one year, traders have been increasingly relying on other aspects in their daily search for information that would assist them predict which currency to bet on. Especially popular now are the news of mergers of companies from different countries and asset flows, including information on investments in foreign stock markets. “The last year saw a huge transformation of the worldwide currency market,”- said Jim O’Neill, chief economist for the currencies of Goldman, Sach & Co. “Capital flows have won, becoming the defining and motivating force.” Perhaps that is why traders had increasingly begun to learn the details of the mergers of giants rather than trying to decode the economical indicators.
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December 7, 2010 | In: Investment