Even in a recession currency trading will be as brisk as ever. The only thing that can change is the currencies that are proving to be the most popular ones to trade with.
A lot can be learned from how traders are reacting to the current market. For example a simple switch from one popular trade to another can cause big differences in the exchange rates, as well as the overall feeling of how the course of the recession is progressing.
We have seen just this in recent days. Despite some people in authority speaking strongly of the US dollar, there has been a change in the currencies that the traders are investing in. Instead of continuing their support for the US dollar, they have moved across to buy the Australian dollar and the Euro instead.
The results of this can clearly be seen in the currency exchange rates for the past week. As the week before came to an end the US dollar was standing at 0.6879 against the Euro. It fell to 0.6841 by Monday evening, before falling further to 0.6792 on Tuesday. A slight resurgence to 0.6805 the following day did not do enough to put the dollar back into control, and by the week’s end investments in the Euro had pushed the US dollar back down to 0.6779.
It was a similar story with the Australian dollar. On the Friday before this last week began, the US dollar was recorded at 1.1582 against the Australian dollar. But the following days of the new week were a different story indeed.
Monday’s trading saw the US dollar fall back almost immediately to 1.1434 as investors leaked away from the US dollar and headed for the Aussie dollar instead. Indeed all in all by the time the week was out, the Aussie dollar would prove to hold the position as the week’s most successful trade, benefiting from this shift in position.
Another big drop for the US dollar on Tuesday illustrated how this change was occurring. The drop left the beleaguered US dollar sitting on a poor 1.1257. The rot slowed down considerably on the following day, as the exchange rate slowed to 1.1237. But that wasn’t the end of the situation, as the final two days of the week showed.
Thursday saw another huge drop in contrast, leaving the US dollar on 1.1072. And when that slipped to 1.1042 as the week came to a sorry end for the US dollar, it meant it had lost out on a total of nearly five and a half cents in a single week.
The question now is whether the traders will stay away from the US dollar in the coming weeks. Where they choose to invest their money depends on a lot of factors, and it would seem at present that the US dollar is not one of those safe havens.
But for the Aussie dollar and the Euro, things are certainly looking up.