Investors Seek Safe Havens
In today’s economic crisis investors are seeking safe havens from the financial storm that is battering the world’s economy. Throughout the world markets are plunging, and companies seeking credit for day to day operations are forced to lay off employees and consumers are fearful and spending less adding to the economic crisis. One of these safe havens for currency investors is the US dollar which continues to offer Forex opportunity in troubled times.
Disappointing Statistics
Disappointing economic statistics released Friday sent stock Markets plummeting throughout the world. In Europe the Markit Purchasing Manager’s Index fell to its lowest in 10 years. In Asia currencies sank on Forex markets making it harder for companies to pay off debt that is in Dollars and Euros. The exception was Japan where the Yen rose to a 13 year high. Japanese exports are floundering and the deepening economic crisis in the US and Europe is sure to have an adverse affect on Japanese exports. Despite the negative economic statistics global currency markets continue to provide investors with Forex opportunities.
The Dreaded ‘R’ Word
Many signs point to a recession and last Friday (Oct. 24, 2008) markets reacted violently due to recession fears. Recent unemployment figures and poor earnings reports only seemed to confirm recession fears. The indication of central banks that interest rates would be cut further failed to calm investor fears.
Economists Predict Fall in GDP
Economists at J.P. Morgan Chase & Co. estimate that the US gross domestic produce (GDP) fell at an annual rate of 0.5% in the 3rd quarter and will fall by 4% in the last three months of the year. This would be the largest economic decline since 1982. Economists are also predicting GDP declines throughout Europe that will last well into next year. Retailers are reporting reduced traffic at malls and street locations resulting in lower revenues.
Bad News From Around the World
In Asia major exporting countries all reported declines in earnings. Several major corporations including, Sony Corp. and Samsung reported earnings declines. Toyota Motor Corp. reported global sales declined by 4% in the 3rd quarter, the company’s first decline in seven years.
In Europe auto makers Peugeot, Volvo, and Daimler all reported slowdown and layoffs are expected throughout the European auto industry. In Sweden Volvo has already announced plans to lay off 1,400 workers.
In the US Chrysler announced plans to trim one fourth of its salaried work force and according to Chrysler’s CEO Robert Nardelli the auto maker is facing “the most difficult economic period any of us can remember â€Fluctuating currency markets are taking their toll also. In the UK valve manufacturer Charlton and Company’s owner must check currency movements on a daily basis before setting some prices due to the fluctuating Pound.
Governments Take Drastic Action
Governments around the globe are taking drastic actions to avert a global recession. In the US there is talk of a second stimulus package with payments directly to taxpayers in the form of a ‘rebate.’ In France Nicholas Sarkozy announced he would suspend taxes on new investments by companies until January 2010. Germany’s Finance Ministry announced a 500 billion Euro plan to rescue the country’s banking sector. Both the European central bank and the Federal Reserve have announced further rate cuts. Governments around the world are taking unprecedented actions to ease recession fears. The dollar remains strong and risk adverse investors are taking advantage of the Forex opportunities the dollar provides in troubled times.
Forex Opportunity Still Available
It remains to be seen how effective these actions will be. In Forex markets the dollar and the yen seem to be the currencies of choice. The US and Japan have the world’s first and second largest economies respectively and stable dollars and yen are essential for the world economy. Profit taking on Forex exchanges remains strong despite recession fears. Although by no means exempt from volatility Forex markets remain relatively calm compared to world stock markets. Forex opportunities are many and savvy investors are still making money.
