Fed to Keep Rates Low

The euro which recently has been a barometer of risk appetite fell after a decline in stocks after the US Federal Reserve said it would keep rates low for the foreseeable future. The euro vs. dollar rate fell 0.3% to $1.4744, after hitting an intraday low of $1.4731. The US dollar remains weaker against a basket of major currencies as risk sentiment rises. Sal Guatieri of BMO Capital Markets stated, “The U.S. dollar is generally weaker against everything. Bond markets are up, equity markets are up. The Fed will keep the monetary pumps at full throttle for another few months. Markets are rejoicing — all markets except the U.S. dollar.”

Fed to Slow Mortgage Backed Securities Program

The Fed said the US economy was in recovery and that it will slow the purchases of mortgage backed securities but will continue the purchase program until the end of March 2010. Many experts expect the dollar selling trend to continue after the Fed meeting. Michael Woolfolk of BNY Mellon stated, “And now that the risk of the Fed meeting has passed, people are comfortable returning to the trend of selling the dollar. That’s the bottom line.”

New Zealand Dollar at 13 Month High

The Kiwi dollar hit a 13 month high vs. the greenback after better than expected data that showed the New Zealand economy pulling out of the recession during the second quarter. The Kiwi rose over a penny to $0.7315. The Canadian dollar which has been weaker vs. the US dollar rose to 93.78 cents. Japanese trading was light as Japanese financial markets closed for a holiday and will reopen Thursday. The dollar index, or DXY, fell 0.27 percent to 75.913 the lowest since last September. The dollar index has declined 2.5% this month due to rising investor confidence in a global recovery.

G 20 Ahead

The G 20 summit looms ahead and will surely affect currency exchange rates. The G 20 is expected to call for a continuation of stimulus programs boosting demand for higher yielding and riskier assets. Clifford Bennett of Kinetic Securities stated, “The G20 is the fly in the ointment. We need to clear that, which has some risk of strong dollar rhetoric emerging. (The) overall down-trend in the U.S. dollar is likely to persist however.”

Quick Forex Tip: Opening a currency trading account is a relatively easy affair but participating in currency exchange markets requires a lot of preparation. Currency trading accounts allow the average investor to participate in the dynamic and lucrative forex market. One of the main reasons so many investors are attracted to currency markets is the leverage available to investors. Currency trading accounts offer investors much higher leverage than is available in stock and commodity markets, so they are a great tool to use.