Monday, May 11, 2009

Forex Update: The Week Behind, the Week Ahead

Traders and economists often have differing views about currency movements. Most traders, like myself, go with the flow of the market, hitching onto the present, participating in the seemingly illogical game of speculation, and not wasting time questioning over whether a particular currency should actually be going higher or lower against another currency. Some economists and non-traders, on the other hand, get angry when a currency keeps going against its assumed “logical” direction and argue that traders are so wrong in believing otherwise. This difference in thinking has stood out prominently over the past few weeks, especially since the US dollar has been rallying so strongly against most other major currencies.o

The past week marked another milestone in forex trading: The US dollar rose to a 6-month high against both the Euro and Swiss franc; it rose to a 7.5-month high versus the Japanese yen, and advanced to a near 2-year high against the British pound.

The most remarkable show of USD strength was seen against the battered Pound: GBP/USD fell for the 11th consecutive day on Friday, and that was the longest period of losses since at least January 1971. It was so long ago that the UK had not even joined the European Economic Community (now known as the EU) then.

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