Get Ready for The Global Financial Crisis

global_financial_crisis.jpgThe failure of major US investment banks and insurance companies, and sharp declines in stock market indexes are affected the value of the world’s major currencies. At present, major banks, central bankers, hedge funds, and home-based investors are in uncertain condition. Generally, when people feel unsure about market direction they will sell off their riskier assets and they buy safer investments.

 

When investor confidence colapse they will start buying US government debt. This is brings benefits to U.S dollar because they need dollars in order to buy US Treasurys. Investors are buying US Treasurys, which are viewed as safe investments because they are backed by the US Government.

 

Generally a nation with a higher interest rate will attract more investment into its currency than a nation with a lower interest rate. The currency of the nation with the increased investment can rise in value as the demand for that currency increases.

 

Be carefull with the European Central Bank interest rate decision. Be aware that often the comments made by ECB President Jean-Claude Trichet are generally more influential than the actual decision itself. And then on October 29 keep watching for next decision of the US Federal Reserve.

 

 

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