The perceived slowing down of economic growth in Asia has sparked some interesting movement in currency prices. The problem was especially apparent in China. Experts expected them to announce that exports had risen by over 30 percent over the last year, but the actual data indicated that exports only rose by 18.4 percent. This discrepancy between expectations and reality has led to some big movement within global stock markets. It has also led to a bolstering of the United States dollar. Because China is the world’s largest exporter of goods, the effect that this has on worldwide currencies will likely be large.
But many other experts believe that China’s slowing down of growth is not as big of a deal as originally thought. China’s year on year exports have been trending lower ever since May of 2010. The sinking in global stocks must have been created by another source. These experts indicate that China was merely a trigger point for an ongoing and increasing worldwide risk aversion brought about by global fundamental indicators.
It’s hard to determine just how big of an impact a single event can have on currency and stock prices. Fundamental and technical indicators are much more interrelated than most people think, and as such, you should always reference both when trading. Whatever the exact reasoning behind the global pullback in stocks might be, the big winner is the U.S. dollar. Since Friday, March 9, the U.S. dollar has risen from a low of about 0.754 up to a current price of 0.7631.
This growth is partly because international traders don’t know where else to put their money. In relation to the U.S. dollar, all of the three other major currencies have recently dropped in price. The Euro was suffering for the longest time because of the Greek debt crisis. With a plan still being fleshed out and people unsure of how the European Union will respond exactly to the proposed solution, the Euro has not been as powerful as it once was. The Japanese yen has seen some problems as well. Over the last few days, the yen has dropped from 0.0124 down to 0.0122. This might be a slight drop, but it still has kept skeptical traders away. And the pound sterling is also meeting with resistance. A week ago, on Monday, March 5, the GBP was around 1.587. Now, the British currency is at 1.563. As you can see, of the big four, the USD is the only one that has meet with acceptable increases in price. By flocking to the dollar, traders are making a statement about the global economy: people are unsure of where exactly to put their money. The U.S. economy might not be in the best shape, but as of right now, the dollar appears to be the best of a bad situation.