Bush Will Host Meeting Of World Leaders To Address Crisis
On November 15th US President George Bush will host a gathering of world leaders to address the current global financial crisis. There has been resentment in some quarters with many blaming the US for the financial meltdown. The crisis started in the US with the sub prime mortgage crisis and quickly spread to the whole US economy and ultimately resulted in a $700 billion dollar bailout of financial institutions. Credit markets froze and interbank lending ceased and businesses found themselves unable to obtain loans for day to day operations. Despite the performance of world stock markets, investors large and small have been able to take advantage of the many Forex opportunities offered by currency exchanges.
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The Economic Crisis
Lately the economic news from around the world has been, by and large, doom and gloom. The world is facing an economic crisis of unprecedented severity and governments around the globe are trying to stimulate the economy. Stock markets in the US, Europe, and Asia have been volatile to say the least.
Despite Economy US Dollar Performs Well
Despite the dismal state of the US economy the dollar has held steady and has actually increased against many world currencies on Forex markets. Analysts are at a loss to explain the performance of the US dollar which some have described as a ‘levitating act.’
For those in the US fortunate enough to have disposable income for travel the performance of the US dollar is offering the opportunities for bargain travel and is also offering investors Forex opportunities in currency exchanges worldwide.
Strong Dollar Good News For Travelers
For US travelers the strong dollar means bargain rates in several countries. In Mexico, for example, a year ago the dollar was worth 10.50 pesos. This year travelers can expect 12 to 13 Pesos for a dollar. Mexico is a popular destination for US travelers and has always offered moderately priced vacations and the strength of the dollar makes Mexico a real bargain for vacationers.
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Plan to Restore Investor Confidence
Tuesday the US government announced a $250 billion plan to help banks repair their balance sheets and restore confidence in markets. The government will inject capital directly into the banking system by purchasing preferred stock and warrants to purchase significant stakes across a number of banks. All of which should help stiumlate the interbank forex market The move is expected to bolster the US dollar providing Forex opportunities to investors.
Half of Funds Will Go to 9 Major Banks
Half of the $250 billion will go to nine banks, JPMorgan Chase, Citigroup, Goldman Sachs Group, Morgan Stanley, Bank of America Corp, Merrill Lynch & Co, Wells Fargo & Co, Bank of New York Mellon, and State Street Corp. Treasury Secretary Paulson pushed the top tier banks to participate so there would be no stigma for other banks associated with the plan.
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Coordinated Rescue Plan in Europe
Following an announcement of a coordinated European bank rescue plan the Euro rose against the Dollar. It is thought by some economists that the European rescue plans have reduced the dollar’s attractiveness as a safe haven. Since mid September the Euro had fallen against the dollar and now that credit markets are beginning to function again Forex traders are more confident of the Euro. A stronger Euro could provide investors with Many Forex opportunities.
US Injects $250 Billion Into Banks
On Tuesday two events gave investors more confidence in both stock and currency markets. The first was the US plan to buy $250 billion dollars worth of interest in major banks. It is hoped the additional capital will unfreeze credit markets and help businesses to obtain short term loans necessary for day to day expenses. Treasury Secretary Paulson noted that it is now up to these banks to resume normal lending practices in an effort to stimulate the economy. The success of the plan is dependent on banks resuming normal lending and a failure to do so would cause the plan to collapse.
Lower LIBOR Rates
Traders also received good news from the London Interbank Offered Rate in the form of substantially lowered rates that indicate the acceptance by the London banking community of global bailout plans. Again the successes of the bailout plans depend on banks resuming normal lending practices.
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Markets Down Last Week
Markets around the globe posted record losses last week but following a meeting of Eurozone leaders over the weekend Asian markets slowly climbed and as of Monday Asia Pacific index gained 7.7% after dropping 20% last week ; the worst performance in its history. While stock markets remain volatile globally Forex opportunities are abundant on currency exchange markets.
Hang Seng Up
In Hong Kong the Hang Seng rose strongly in afternoon trading, and gained 10.2% in afternoon trading. Stock markets throughout Asia rose with the Singapore market gaining 6.6%, followed by Korea with a 3.8% gain. India’s Sensex gained 7.7%, China posted gains of 4.12%. Japan’
s stock market was closed for a national holiday but Japanese interbank FX traders remain optimistic.
Light Trading
Light trading in Asian markets indicates that Asian traders are waiting to see how the US and European bailout plans will affect Wall Street. Over the weekend European central banks suggested they would follow the UK’
s lead by buying stakes in struggling banks and underwriting interbank loans. The US bailout plan is slowly taking effect and it is hoped that recapitalizing banks will unfreeze credit markets.
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