How Stable Is the Currency Market

As U.S. economy improves, currency will become stronger

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Mar 10, 2016
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Once again, the U.S. dollar has found itself to be challenging the other top world currencies.

As the dollar continues to fluctuate, many foreign exchange investors living in the U.S. and some traders worldwide are following its progress and being careful not to lose their investments. At times, it seems the other currencies have to be playing catchup with the U.S.’s foreign exchange or sometimes barely holding their own.

The U.S. economy at this time is performing in a healthy manner. So far, inflation is down and the unemployment rate is dropping as well. Inflation for the year 2015 was 1.4% with the current rate being at 1.3%. In May of 2015, the unemployment rate touched 5.5% – and 5% in November. January saw unemployment drop to 4.9%, which is saying according to the trend seen so far, it is expected to continue dropping further in the year.

The euro lost ground to a one-month low against the U.S. greenback despite reports circulating that the eurozone was picking up. Unemployment rate in Germany went down, touching a four-year low from 10.3% to 10.4%, which is a welcoming break for the economy and investors are hoping that forex trading will pick up speed.

The British currency saw a positive performance during the day and ended on a high. The U.K.'s PMI Index went down from 52.9 to its lowest level after rising nonstop for three years. The next PMI report is expected to show weaknesses in the country’s economy.

A strong U.S. equities market triggered a rise in commodity currencies. The Canadian dollar showed positive signs against rising oil prices. A more stabilized GDP amount made the Canadian economy take on a new strength since December. Canada’s economy grew by 0.2% in December, and this growth enabled the country to show a year-over-year rate of 0.5%.

Australia showed good progress in February, and this performance helped to produce an explanation of the bank's neutral position. The nation’s reserve bank decided against moving the interest rates for another day but showed enough concern over the rate of inflation the country is presently experiencing.

The New Zealand currency performed positively mainly because of the growth of the dairy industry in that country. Although dairy prices went down in 2016, the industry picked back up 1.4%. The growth in the economy eased the reserve bank’s concerns, which produced an easier task for the economy to continue on its path of recovery.

Meanwhile, the Japanese yen ended up trading lower because of weaknesses in the country’s economy. Experts are saying that the government should work to bring stabilization and growth to the Japanese economy.

As the U.S. economy continues to improve, investors in the foreign exchange market will see a strengthening of the country’s currency. So far, some global currencies seem to be staying above water while others are failing.