Here’s a forex market movement for our times:-

Despite forecasts for a depreciation of the Dollar, many economists are now saying that the negative housing data released from the United States yesterday may actually bolster the USD.

Let’s state the effect in the simplest possible terms.

Bad news for the US economy, lower jobs, lower GDP, leads to lack of confidence
Which leads to a rush towards safe haven currencies…
Which leads to buying USD – because USD is in itself, considered a safe-haven currency…
So bad US news leads to USD going up.

This rush to a safe haven, any safe haven, after every news announcement is creating some weird effects. It flies in the face of logic, well, simple logic anyway – and is a sign of the present dominance of USD

No, I don’t know of any name for this upsidedown, wrong-way-round, echo, reverb effect – but it certainly ought to have a name…
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There’s little doubt that there’s another round of coordinated central bank rate cuts in the offing. It will have been discussed at the summit of G7 finance ministers at the weekend, together with other solutions to the overall market crisis. The usual question at this point being is it really enough to make any difference at all?

Last week, AUD dropped 20% against the yen to hit ¥64.50 – the largest single week fall since it floated back in 1983 – before rallying to ¥64.96. NZD got rid of 13.7% over the week to close at ¥60.01.
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