The foreign exchange market is the largest financial market in the world, with an average of $3 trillion traded daily. Most financial trading is done in American dollars, so the current depreciation of the American currency is somewhat unsettling for some full time investors.
With the US dollar currently weakening, the exchange rate is going up. This means that it costs you (an American trader) more US dollars to buy foreign money.
Rising gas prices, expensive groceries and a failing real estate market are all contributors of the dollar’s demise.
Gas prices are causing American consumers to spend less money on products than normal. The US government has recently created an economic stimulus package to combat some of this. Giving out $600 to each taxpayer, $1200 to couples and $300 to each dependent child hopefully will send taxpayers on a spending spree, thereby jumpstarting the economy.
The Federal Reserve has been reducing interest rates to help stabilize the real estate market and slow down the mass foreclosures of homes. Although this does help homeowners, it also deters foreign investors from putting their money into the US. Also, citizens who would invest domestically could place their money in foreign investments because of their higher interest rates.
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