Ok yes it is true that the Foreign Exchange market is pretty indecisive and investors have to face lot of uncertainty and due to any or no announcements by the Federal Reserve has an effect on the US dollar which in turn effects lots of other world currencies. But also that the Dollar on it’s own cannot be blamed for such irregularities in the market because there are other factors like internal economic changes which add fuel to the increase or decrease in a currency, like the one happened yesterday with the Yen , when it weakened against the Dollar and the Euro after a Government report showed that the Japanese market had a greater than expected growth in the third quarter which will give Japanese investors more confidence to buy overseas assets.
There are other reasons like the interest rate change , in fact this is the first reason as to the fluctuations in the foreign currency market. Such a situation arises almost in every country , like now for example it is expected that the UK pound may decline over speculations that the Bank of England will be lowering interest rates in 2007. I do feel that the interest rates were initially pretty high , and this resulted in the decline of the Pound against the Euro and also the Dollar. And again the internal factors also effected the Pound, with the consumer prices rose a less then expected 2.4 percent from a year ago. So well it is expected that the interest rate may be somewhere around 5.36 percent in March 2007.
Therefore , any changes in the foreign currency is mainly due to interest rate changes which is happening quite often. So my advice is tread slowly and carefully when it comes to trading in currencies. Happy Trading!!!!!!
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