Despite many positive economic advances in the United States over recent years, continued concerns about the potential for triggering and entering a recession still plague both the domestic and international markets. This concern has led to market volatility many different times over the past year, including large drops and then gains within stocks and currency values. This has been especially impactful on how the United States dollar compares to world currencies like Japan’s yen, which has now risen in value above the dollar.
The dollar has long been the world’s gold standard in determining how other currencies measure up. When the dollar is at a lower value than other world currencies, it can indicate major market and economic troubles within the United States. At other times, the immediate market rush to panic over a falling dollar value seems more like a vast overcorrection versus actually imminent issues.
Current areas of concern about falling dollar values include slowing growth within the US economy, particularly in sectors including manufacturing. Observations about the inversion of the yield curve has resulted in international market chatter about the dollar entering correction territory. World events such as US-China relations amid tariff discussions may also be influencing the current volatility of currency values. In addition, remarks from the Fed about current interest rates have kicked off deeper discussion about where market values may head in coming months.
Several other world currencies are also experiencing setbacks and lowered values, including the Australian dollar. Both the Aussie and American dollar have lost nearly a full percentage point against the Japanese yen. Traders on all sides of the Pacific are watching extremely closely to determine what may happen next and how to change their market positions as a result. Foreign exchange or Forex traders are accustomed to sharp rises and declines. As the foreign exchange market is a 24/7 operation, traders rely on the flow of information out of various parts of the world to best inform their trade decisions, with beginning traders carefully mimicking the positions and decisions of experienced counterparts.
As the Fed prepares to potentially deliver an interest rate hike in coming months, investors are poised to respond based on that speculation as well as the release of November economic indicators and results from the 2018 holiday shopping season. Each factor may weigh prominently in how the Forex and domestic markets enter the 2019 trading year.