Forex Trading Guide

US Dollar as the Global Currency
The status of the US Dollar is being openly challenged. The US Dollar share of Global Currency Reserves dropped noticeably. Its use as a Global Trading Currency has also being eroded. The US Dollar’s days as the key Global Currency could be numbered.

The US Dollar share of Global Currency Reserves fell in the second quarter to 62.8 percent, from 65 percent in the first three months of the year, an IMF report showed. The Euro’s share of Global Currency Reserves rose to 27.5 percent, from 25.9 percent.

US Banking System and Monetary Policy
The root cause of the global financial crisis is the poor US Banking System and its Monetary Policy. The recession started in the United States because of the poor the Banking System and spread like wild fire worldwide. The Monetary Policy escalates the recession into the present Global Financial Crisis.

The causes behind the weak dollar are many and complex, but essentially this means that investors around the world have become less confident in the future stability of the US Dollar.

Printing More Unsecured US Dollar
In one instance, the US Dollar started tumbling on March 18 as the Fed’s announcement of its plan to print money to buy Treasuries and Mortgage Bonds. The flaw is that the US Dollar is not backed by anything since August 1971.

Eroding Confidence in US Dollar
In May 2009, the world showed its low confidence in the US Dollar. Brazil and China started their negotiation in replacing the US Dollar in their bilateral trade.

At about the same time in May 2009, Russia, a member of the G20 could no longer tolerate the US Monetary Policy. Russia called for a new global currency to replace the US Dollar.

China is said to have shown their disappointment with the US Monetary Policy by quietly liquidating part of their $2 Trillion Dollars in US Dollar reserves and relocated to gold. This explained the sudden increase in price of gold at that time.

Aside from this, they are also becoming vocal once more. A top Communist party official in a press release expressed their dismay about the US Treasury printing more and more unsecured money to cover their bills.

Cheng Siwei, a top leader in China told the UK’s Daily Telegraph that Beijing was being compelled to redesign its foreign currency reserve policy.

The G7 Stand on US Dollar
On Oct. 3, G7 finance officials refrained from calling for measures to bolster the world’s main reserve currency. In a direct reference to the US Dollar, they repeated the language they used in April in their statement, said:

excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability.

The G7 dominated economic policymaking for two decades, but Saturday’s meeting underlined that it could no longer solve global problems without the cooperation of fast-growing economies in the developing world such as China.

Oil and US Dollar
On the 6th. October, 2009, the US Dollar fell further after the U.K.’s Independent newspaper said Persian Gulf states and countries including Japan, Russia, France and China discussed dropping the U.S Dollar for oil trades.

A stern warning about the US Dollar was made to the rich oil producing countries by Tun Dr Mahathir Mohamad in his speech on the Global Financial Crisis, in Iran on 30 November 2008.

United Nation and US Dollar
Unctad, the United Nation Conference on Trade and Development in a statement said that the world need a new Global Monetary System to prevent excessive speculations and trade imbalances.

Asian and US Dollar
Japan’s new Prime Minister, Yukio Hatoyama called for an East Asian Economic Community, European Union style community and formulation of its own currency.

He said the proposed East Asian community involving 16 countries, 10-member Association of Southeast Asian Nations (ASEAN) with regional partners China, Japan, South Korea, India, Australia and New Zealand, should aspire to take a leading role as the region makes an early rebound from the global economic crisis.

Meanwhile, ASEAN leaders have been discussing plans to create their own political and economic community by 2015.

Technorati : Brazil, China, Dollar, Japan, Russia, US Dollar