In this section we explain how economic fundamentals indicators, such as interest rates, influence FX rates.
Early indications are that the death of Osama Bin Laden will cause a significant rise in the S&P 500 but not necessary a rally in the USD vs. cross currencies. Read more >>
A flat yield curve occurs when there is little difference between the interest rates on government bonds for different maturities. For example, the rate on the one month bond might be similar to that of the 3 month or 1 year bond as illustrated in the chart below. Read more >>
In a previous article we looked at how interest rates affect fx rates. If you are not familiar with this concept, you should first review that article before reading on. This article looks at how the yield curve can be used to predict future interest rate trends. Read more >>
In recent times, the USD has been sold off against all major cross currencies. This article looks at why the USD has performed so badly and looks at the future of the Greenback. Read more >>
The devastating floods that have rampaged south east Queensland, including the CBD area of Brisbane, are set to keep the Australian dollar low vs. cross currencies for at least the next 6 months as Queensland recovers from the significant loss of business infrastructure. Read more >>
The foreign exchange market works a little differently to the stock or commodity markets. Specifically, you cannot look at one currency in isolation to form an exchange rate. You must look at a currency in conjunction with another currency in order to form an exchange rate. Exchange rates are always expressed as a combination of two currencies. Read more >>
To answer the question on how interest rates affect foreign exchange rates, you should first refresh yourself on what a foreign exchange rate is. It’s always a combination of two currencies (e.g. USD/AUD or EURO/USD). Read more >>
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