US Dollar 'Certain' to Remain Global Reserve Currency, Says Bernanke (Euro Open)

US Federal Reserve Chairman Ben Bernanke said he is “certain” the US Dollar would remain the world’s reserve currency. The British Pound may see volatility in European hours with the March Trade Balance and Industrial Production reports on tap for release.

Key Overnight Developments

• Bernanke ‘Certain’ US Dollar Will Remain Global Reserve Currency
• Australian Lending for Property Investments Surges Most in Nearly 2 Years

Critical Levels

The Euro rebounded a bit in Asian trading, testing above 1.36 once again but losing its grip on the figure ahead of the opening bell in Europe. The British Pound oscillated in a familiar 100-pip range below 1.5170 that has confined the pair over the past 24 hours.

Asia Session Highlights

US Federal Reserve Chairman Ben Bernanke sounded notably optimistic in a speech at Jekyll Island, Georgia, saying Wall Street’s response to bank stress tests was “encouraging” and that troubled financial institutions are now "way ahead" in raising capital. On the macro economy, the Fed chief said deflation risks are "receding" and an inflation rate at 1.5-2% is "appropriate". Speaking of the US Dollar, Bernanke said he is “certain” the greenback would remain as the world’s reserve currency.

In Australia, Investment Lending for property purchases surged 4.7% in March after falling -2.9% in the previous month, the largest upswing since June 2007. On the surface, the metric suggests that demand for big-ticket items is returning. Still, the data is not as encouraging as the headline figures would suggest. The cumulative monetary value of lending to real estate investors remains at the lowest level since 2002, coming in at just A$4.9 million as compared to the peak at nearly A$8 million when loans peaked in June 2007. If unemployment should rise to 6.75% this year and reach around 8% by 2010 as is being forecast by the National Australia Bank, housing demand may remain weak for the foreseeable future.

Euro Session: What to Expect

The UK Trade Balance deficit is set to narrow to -7.2 billion pounds in March from -7.3 billion in the previous month. The result is likely to owe more to a decline in imports rather than swelling cross-border demand. Even after excluding oil shipments to factor out the dramatic collapse in crude prices over the past year, exports have trended sharply lower since July 2008 and snapped a multi-year uptrend dating back to the beginning of 2004 in January. To that effect, an uptick in the headline external balance figure speaks of the timid consumer, not an improving trade environment. Lackluster overseas sales have weighed on manufacturing, a sector that tops the list of UK exports and employs 20% of the country’s workforce, with Industrial Production expected to post another record-setting drop at -12.8% in the year to March.

Separately, the Department for Communities and Local Government (DCLG) is likely to report that UK House Prices fell -13.0% in the year to March, the largest drop in at least 6 years. Rising unemployment and scarce credit access have kept buyers away from big-ticket purchases, sending property values lower. For those that already own a home, the decline amounts to a negative wealth effect, eroding the value of one’s assets to discourage spending and thereby keep a tight lid on economic growth. A survey of economists conducted by Bloomberg has estimated that the economy will shrink -3.7% this year.

Turning to the continent, the final revision of Germany’s Consumer Price Index is expected to confirm that inflation ticked up to 0.7% in the year to April from 0.5% in the preceding month. Currency depreciation and a holiday-linked spike in spending accounted for the increase: the Euro shed 2.1% on average against the currencies of Germany’s top non-EZ import partners, making imported goods comparatively more expensive for German consumers; meanwhile, the Easter holiday atypically fell on April as opposed to March this year.

Written by Ilya Spivak, Currency Analyst
Article Source - US Dollar 'Certain' to Remain Global Reserve Currency, Says Bernanke (Euro Open)
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What is Forex?

If you would go out on a dinner with your friends or family and you mentioned that you were trading on the Forex market most of them wouldn’t know what you were talking about. The worst thing is that most of the Forex traders that join the Forex market don’t know what they are doing. Understanding what Forex is, is the first good step to your success at Forex trading.

The foreign exchange market (Currency, Forex, or FX) is where currency trading takes place. It is where banks and other official institutions facilitate the buying and selling of foreign currencies. Forex transactions typically involve one party purchasing a quantity of one currency in exchange for paying a quantity of another. The foreign exchange market that we see today started evolving during the 1970s when world over countries gradually switched to floating exchange rate from their erstwhile exchange rate regime, which remained fixed as per the Bretton Woods system till 1971.

Today, the Forex market is one of the largest and most liquid financial markets in the world, and includes trading between large banks, central banks, currency speculators, corporations, governments, and other institutions. The average daily volume in the global foreign exchange and related markets is continuously growing. Traditional daily turnover was reported to be over US$3.2 trillion in April 2007 by the Bank for International Settlements. Since then, the market has continued to grow. According to Euromoney's annual Forex Poll, volumes grew a further 41% between 2007 and 2008.

Forex Turnover

Forex Turnover
Main foreign exchange market turnover, 1988 - 2007, measured in billions of USD.
The purpose of Forex market is to facilitate trade and investment. The need for a foreign exchange market arises because of the presence of multifarious international currencies such as US Dollar, Pound Sterling, Yen, etc., and the need for trading in such currencies. Since you aren’t buying anything physical this kind of trading can be confusing. When buying a currency think of it as buying a part in that particular country’s economy because the currency rate reflects the economical situation of the country when compared to others.


List of most popular currencies on the Forex market

Forex used to be a closed market because only the “big boys” because you needed between 10 and 50 million $ to open an account. But today, with the development of internet, online Forex brokers have the possibility to offer their services to “little” traders. All you need to start is a computer, fast internet connection and information which you can find on this page also.

This enormous market is like the dangerous sea where you can meet lots of sharks and dangerous waters but at the same time it is the only one where two weeks of trading can hypothetically bring you $1,000,000 out of $1,000 of initial investment.

This is certainly hypothetically because a lot of newbie traders deal with their trades as gambling, that surely bring them to having nothing in the end. You should always keep the phrase "be careful!" in your mind. This market would give you its profit possibilities only if you learn the basic things hard and make lots of demo trading.

The statistics is that as much as 95% of traders come to losing their money at Forex, 5% have profit and less than 1% of traders make large fortune at Forex. You shouldn't produce, sell or advertise anything trading at Forex. Your assets are your knowledge, experience and a small amount of cash.

This market is a platform for banks, transnational corporations and individual traders to change the currencies they possess into other ones. This is the spot Forex market. At this market you can trade with up to 1:400 leverage which means that you'll get $400 on your account for each dollar invested. So, you can trade with the $400,000 sum having invested $1,000 onto your account.

Forex is unique among other world markets because in any time of day and night, somewhere in the world, a financial centre is open for business, banks and corporations exchange currency all the time, with a little lower frequency during the weekend.

Why to trade on Forex?

1. There is no commission fee for trading at Forex.
2. There is no intermediary, you can trade directly at Forex.
3. Forex is open 24-hours a day.
4. Nobody can influence the market for a longer period.
5. High liquidity.
6. Free demo accounts, analysis and charts.
7. Small accounts that allow everyone to try out his luck.

Hope this has answered a lot of questions you were asking yourself about Forex and that you can now start trading. Also make sure that you check out other articles on this blog which can help you earn your fortune.

Good luck to everyone!