US Dollar Currency Profile (Part I)
As a currency trader, you should know the US Dollar intimately. It is important for you as currency trader to have a good grasp of the general economic characteristics of the most commonly traded currencies. US Dollar is the most heavily traded currency in the global economy.
You should know as a trader what moves the currencies particularly the pairs that you are interested in trading. Traders need to also know the difference between the expected and the actual data. Some currencies tend to track commodity prices while others may move in complete contrast.
News or data that is in line with the expectations has less of an impact on currency movements than unexpected news or data. The correlation between the currency markets and news is very important. Therefore short term traders need to closely monitor the expectation of the currency markets.
United States is the worlds leading economy. US GDP is approximately three times the size of Japan, five times the size of Germany and seven times the size of UK. The US economy is now a service oriented economy with almost 80% of GDP coming from real estate, transportation, finance, health care and business services.
However, the manufacturing sector is still formidable and US Dollar is particularly sensitive to the development within the sector. United States has the worlds most liquid and deep equity and fixed income markets in the world.
Investors from all over the world purchase US assets due to their liquidity and safety. Foreign Direct Investments (FDI) into the US is equal to almost 40% of the total net inflows for United States. The import and export volume of US also dwarfs the countries. This maybe due to the sheer size of US as true import and export represent only 12% of the GDP.
US economy is facing the paradox of the twin deficits. One is the Budget Deficit and the other is the Current Account (CA) deficit. US is running a large CA deficit for more than a decade now.
Due to the high CA deficit; United States need to attract a few billion dollars of capital inflows daily in order to prevent the decline in the value of US Dollar. In other words, the Current Account (CA) deficit is being financed by the Capital Account (KA) surplus. The large CA deficit makes the US Dollar highly sensitive to changes in the capital flows.
United States is a member of the World Trade Organization (WTO). This means that United States is heavily committed to the free trade idea. A weaker US Dollar will help boost US exports whereas a stronger US Dollar makes the US exports expensive and US imports cheap. US trade is equal to roughly 20% of the world trade. United States is the trading partner of many countries across the globe.
Leading import sources for United States are: Canada, China, Mexico, Japan and EU. Leading export markets for United States are: Canada, Mexico, Japan, EU and UK. The growth and political stability in countries that are leading export markets for US are important. For example, should Canada growth slow; its demand for US exports will fall that will have a ripple effect on US growth. - 23212
You should know as a trader what moves the currencies particularly the pairs that you are interested in trading. Traders need to also know the difference between the expected and the actual data. Some currencies tend to track commodity prices while others may move in complete contrast.
News or data that is in line with the expectations has less of an impact on currency movements than unexpected news or data. The correlation between the currency markets and news is very important. Therefore short term traders need to closely monitor the expectation of the currency markets.
United States is the worlds leading economy. US GDP is approximately three times the size of Japan, five times the size of Germany and seven times the size of UK. The US economy is now a service oriented economy with almost 80% of GDP coming from real estate, transportation, finance, health care and business services.
However, the manufacturing sector is still formidable and US Dollar is particularly sensitive to the development within the sector. United States has the worlds most liquid and deep equity and fixed income markets in the world.
Investors from all over the world purchase US assets due to their liquidity and safety. Foreign Direct Investments (FDI) into the US is equal to almost 40% of the total net inflows for United States. The import and export volume of US also dwarfs the countries. This maybe due to the sheer size of US as true import and export represent only 12% of the GDP.
US economy is facing the paradox of the twin deficits. One is the Budget Deficit and the other is the Current Account (CA) deficit. US is running a large CA deficit for more than a decade now.
Due to the high CA deficit; United States need to attract a few billion dollars of capital inflows daily in order to prevent the decline in the value of US Dollar. In other words, the Current Account (CA) deficit is being financed by the Capital Account (KA) surplus. The large CA deficit makes the US Dollar highly sensitive to changes in the capital flows.
United States is a member of the World Trade Organization (WTO). This means that United States is heavily committed to the free trade idea. A weaker US Dollar will help boost US exports whereas a stronger US Dollar makes the US exports expensive and US imports cheap. US trade is equal to roughly 20% of the world trade. United States is the trading partner of many countries across the globe.
Leading import sources for United States are: Canada, China, Mexico, Japan and EU. Leading export markets for United States are: Canada, Mexico, Japan, EU and UK. The growth and political stability in countries that are leading export markets for US are important. For example, should Canada growth slow; its demand for US exports will fall that will have a ripple effect on US growth. - 23212
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try Strignano's Forex Signals free. Discover a revolutionary Forex Robot Trading System!
posted by X - Men @ 5:13 AM
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