Crisis Changing the Rules

The recent global economic crisis has thrown world markets into chaos. The recent crisis has destroyed some economic theories that have been held for generations. Crises have a way of separating the strong from the weak but this seems to no longer be the case.

Dollar Strong Despite Massive US Deficits

Take the US dollar for example. The Federal Reserve’

s balance sheets have risen from $300 billion dollars to $3.5 billion dollars in three short months. Some are predicting hat the US budget deficit will be as much as $1 trillion dollars in 2009. The impact of this increased debt so far has not had devastating effects on the US. In fact the US dollar has risen 15% against the Euro and 20% against the British Pound.

Dollar Doing Levitating Act on Forex Markets

Had these things occurred in an emerging economy like Mexico or Brazil, investors and businesses would have fled these countries creating a devastating crisis and a likely devaluation of currencies. Yet under these same conditions the US dollar continues to thrive on Forex markets and the dollar continues to offer many Forex opportunities. The dollars levitating act continues despite the worst global economic crisis since the great depression of the 30’

s.

Risk Aversion Helping the Dollar

The dollar has fallen 13% against the Japanese Yen but economists explain that investors unable to profitably invest the low interest Yen are parking their money in US dollars. Global recession fears and risk aversion also play major roles in the surprising performance of the Dollar. The dollar, at present, is providing more Forex opportunity than the low interest Yen.

Economists Predict Weaker Dollar During Recovery

Some economists believe that the real measure of the US dollar will take place when global economic recovery takes place. The appetite for risk will increase and investors will start to sell of US treasuries in favor of higher return investments. While the dollar will probably not fare as well during a recovery it will provide plenty of Forex opportunity for the immediate future.