Economic news and the us dollar

Positive economic news, which is associated with lower bond prices and higher interest rates, rallies the U.S. dollar against other foreign currencies. The value of the U.S. dollar represents the strength of the U.S. economy. When the economy is doing well, other people want to own a piece. For example, the sharp rally of the yen against the U.S. dollar during the early fall of 1999 was the by-product of a perception of a strengthening Japanese economy.

Negative economic news, on the other hand, which is associated with higher bond prices and lower interest rates, weakens the U.S. dollar against other foreign currencies. If the U.S. economy is perceived to be weak, the dollar represents that weakness. The U.S. dollar posted its all-time post-World War II lows against the yen just before the great bull market of the 1990s kicked into full force. During this period, the American economy was in recession, just starting to come up for air.

Was this article helpful?

0 0

Post a comment