The volatility index (VIX) measures the volatility of a wide range of options on the S&P 500 Index and is used to gauge the markets’ expectations for volatility over the next 30 days. Quoted as a percentage, a VIX figure
greater than 30 is associated with high volatility resulting from investors’ fear of uncertainty, while values under 20 are associated with relatively low volatility or less anxiety about the market. Low values may also reflect complacency arising from overconfidence with a rising market, or exuberance. Accordingly, the VIX is known as the fear index. During the market crash of October 1987, the VIX shot up to a record high of 172 from the mid-20s in the prior week. Continue reading
Due to structurally low interest rates in Japan and Switzerland, the yen and the franc often served as funding currencies, used by speculators to borrow in lower rates and invest the proceeds in higher-yielding currencies and other assets such as gold, oil, and equities. Both the yen and franc have commanded interest rates lower than those in other G10 nations mainly due to their expanding current account surplus. A surplus in the current account signifies that both countries’ exports of goods and services are greater than their imports. It also tells us that both nations are net savers— in other words, creditors of capital—rather than net investors or debtors, thereby not requiring their interest rates to be as high as the rest of the G10 economies experiencing current account deficits. Continue reading
2003: DOLLAR EXTENDS DAMAGE, COMMODITY CURRENCIES SOAR
The major differences distinguishing the global economic/market environment surrounding the 2003 dollar sell-off from that of 2002 were (1) the breadth of the commodity rally; (2) increased geopolitical uncertainty weighing on the U.S. dollar and U.S. assets after the outbreak of the Iraq war; and (3) deteriorating budget deficit and current account deficit balances. Prolonged interest rate cuts by the Federal Reserve to a 45-year low of 1 percent also accelerated the dollar decline and boosted commodities as the Fed vowed to inject the liquidity to allay the risk of deflation. This readiness to debase the currency via aggressive rate cuts and injection of liquidity was likened to dropping money from helicopters, a metaphor that would earn its author, former Fed Board governor Ben Bernanke, the moniker “Helicopter Ben.” The Fed’s so-called reflationary monetary policy—boosting liquidity to lift inflation above zero—was a significant negative for the U.S. dollar and a windfall for commodities as investors fled the low-yielding currency for the high-growth commodities as these appreciated against their principal invoicing currency. Continue reading
WORLD INTERVENES AGAINST STRONG DOLLAR (1985–1987)
The excessive strength of the U.S. dollar proved detrimental to the world economy. The U.S. trade gap moved sharply into a deficit and millions of manufacturing jobs were lost. Sharp depreciations in the currencies of the
United States’ trading partners triggered surging inflation that required central banks to tighten aggressively, sending their economies into recessions. Continue reading
The First Dollar Crisis (1977–1979)
The U.S. dollar rebound of the mid-1970s came to a halt in summer 1976. What followed in the second half of the decade would be a five-year decline in the currency, unprecedented in the new post–gold standard era. [ad code = 3]
Jimmy Carter’s presidential campaign against Gerald Ford sought to lift the U.S. economy from its slowdown in the second half of 1976. Carter’s currency policy was famously based on the talking down of the U.S. dollar, especially through his outspoken Treasury Secretary Michael Blumenthal, who pressured the Fed into monetary policy easing. The slide was accelerated in June 1977 when Blumenthal talked down the dollar after a meeting with his German and Japanese counterparts. The new policy sent the dollar tumbling more than 20 percent between January 1977 and October 1978, a dramatic plunge by postwar standards. The chart shows how the dollar tumbled 38 percent against the Japanese yen as Japan’s trade surplus soared on its burgeoning exports industry. The chart illustrates the 22 percent decline in the U.S. dollar index from its 1976 peak.
The dollar crisis was a vociferous manifestation of eroding market confidence in Carter’s economic policies despite the fact that U.S. interest rates were yielding substantially more than those overseas. While the
United States had embarked on a gradual tightening policy starting in early 1977, Germany and Japan were in the midst of an easing campaign that lasted well into 1978. From summer 1977 to autumn 1978, U.S. interest rates nearly doubled from 5.9 percent to 9.5 percent. In contrast, German and Japanese rates fell from 4.5 to 3.5 percent and from 5 to 3.5 percent, respectively, tripling the yield advantage in favor of the U.S. dollar. So why did the dollar damage occur when the U.S. currency had yielded substantially higher rates than its German and Japanese counterparts?
The answer lies in Carter’s policy of targeting a 4.9 percent unemployment rate, following the stagflation days of the Ford administration where unemployment breached 9 percent and inflation crossed over 11 percent.
As Carter pursued his unemployment target via major fiscal stimuli, inflation headed back up and so did the budget deficit—the two bogeymen of financial markets. Inevitably, confidence in the dollar continued to erode.
In November 1978, the United States mounted a massive joint intervention with Germany and Japan to buy dollars against foreign currencies. The move was supplemented with a 100-basis-point increase in the discount rate, the biggest in 45 years. The coordinated intervention proved limited in stabilizing the U.S. dollar. It wasn’t until the Fed rewrote the rules of monetary policy management to combat soaring inflation in late 1978 that the currency began to turn around.
If you are trading or have traded in the Forex market you must have heard about Forex brokers. As a trader, you might not know what a Forex broker is and what they do exactly. Continue reading
Today’s Forex Market
Our nations turmoil has led investors to lose confidence in the dollar verse other currencies. If you think about it, the best economic indicators we have can be traced back to currency fluctuations. Investors buy and hold currencies in good times, and sell in bad, to pay the bills at home. This seems to be the current movement due to our nations crisis which will force the government to make some drastic moves to stabilize the financial doings of aggressive currency fluctuations. The Euro has become week, and the fear of rising inflation through Europe has a detrimental effect on society. Japan’s Yen verse the dollar became to strong, and this had a huge effect on the exportation of goods, so both events can land problems for a countries economy. The sub prime crisis has lifted currencies to a new level of respect. The sovereign debt crisis in Europe has had an equally crushing effect on the Euro. The last 12 years have been so turbulent in these Forex markets that it’s no wonder that Forex trading platforms have become so popular amongst investors. However, with the Banks doing more and more business with Forex brokers, it’s easy to see why Investors are making the switch to trading Currencies. Continue reading
Popular Forex Robots
Is a program which was created and improved by financial analysts and IT professionals. It is designed with the mathematical algorithms by including some program language such as MQL4. It helps the system software to perform trading through online in the forex trading. This performs the trading on behalf of the traders. It has the capacity to operate in full automation with small level of human intervention. These forex robot are composed of special settings which are accomplished in the automated mode. . The famous which is normally used by people is MetaTrader 4. It performs the work as advisors by checking the market and performing the forex trading on behalf of you automatically. It is designed to do the bidding manually. The names for forex robot platforms are many such as the Forex MegaDroid, IvyBot, and the FAP Turbo. All are designed to work with the same qualities. The main aim of this forex robot platform is to make money for you. Some type of forex robot software has the capacity to look the condition of the market for you to trade easily. It is capable of identifying the market condition, its trends, and be able to check the correct time to exist the trade. Continue reading
Trading on foreign exchange is a 24 hour business being conducted in all countries and corners of the earth. It requires accuracy in predictions of market trends. One needs to be on the look out which currencies are on an upward or downward trend, know what to offload, when, and which currency to hold on to. It sound more like gambling but this takes more scientific mathematical calculations than just mere luck – this was what necessitates several individuals and companies to develop tool that could assist in coming up with the most near perfect prediction possible; thus the development of the Forex Robots.
Forex robots is reverence to computer software that guides a trader to make the most informed decision on different kinds of currency he is trading in. more advanced software – the automated forex robots are programmed in a manner that it does the actual trading on ones behalf. Thus this machines enables one make more accurate informed decisions as well as freeing ones times as one would need to sit behind a computer for 24 hours. This is because as markets in the USA are closing those in the far east like Tokyo and Moscow are opening followed latter by Europe and Africa as all open and operate in different time frames.
The degree of accuracy for the forex robots is not 100 % with only a few like megadroid borrowing from their 38 years experience in this particular technology guarantying approximately 95.82%, as this software perform this mathematical formulas more like a computer note withstanding that market are also dependant on other factors not arithmetic like stability of currency countries, demand and supply forces. Computers on the other hand can help in decision making as they have no emotions like human being. Making a decision on with soft ware to shop, view automated forex robots as a tool guide to enhances your trading skills thus making you good profit, as well as one that can easily misguide to lose making wiping out your investments cum savings.
Shop wisely for these programs lest you find yourself with useless software that doesn’t perform the tasks making it a reap-off. To avoid falling prey, use the services of a broker capable of advising you on well tested and proven forex robots. In the USA brokers like MB trading – California , Questrate Inc. – California, Alpari (us) and LLC – New York are available with more information of them and others accessible in the internet.