USD, JPY May Rise as US-China Tension Over Hong Kong Escalates
In a month of escalating tensions between the United States and China, there may be a strong chance that the USD, JPY will rise. The reason is that a lot of political tensions are swirling around the United States and China right now. As we move further into June and towards September, the tensions will likely only to intensify.
Right now, the Fed is trying to pull the economy out of a severe recession, yet the strength of currency markets should help the USD, JPY gain some strength at this time of year. US Dollar, being considered the top currency in the world, will be a major player in Forex trade throughout the summer. The Chinese economy is weak, and the US Federal Reserve is trying to ease the nation out of a recession. In addition, the US continues to clamp down on economic transactions with China.
On the other hand, there is a possibility that the Chinese government may not allow for more RMB into the US Forex market. This could cause a deceleration in USD, JPY selling. This means that there could be an increase in USD, JPY during the summer months.
Forex traders need to understand that as any Forex trader knows, the strength of a currency can affect the value of all other currencies. They are all based on the value of a specific currency. When USD, JPY weakens, the EUR also weakens, and when the USD, JPY strengthens, the EUR increases. It is a simple formula that goes like this: Weakest currency – the strongest currency.
Forex traders need to know how to navigate these complex equations, and understanding how the forex exchange works, and how that affects the prices that they trade. They also need to know how to make educated guesses about where currencies will go in the future.
Forex and currency markets are currently having a difficult time deciding what is going to happen in the coming months. US and Chinese public opinions are becoming more intense, and there is a likelihood that the US and Chinese governments will soon be playing a hard ball game.
Both sides may be signaling for tough economic times, and inflation is also a factor. As there are no easy answers to the problems, the dollar may not move lower against the USD, JPY as it did in past years.
In addition, the dollar has been going lower for most of the last year and investors looking for short term gains are making a short-term bet against the dollar. Some are making bets on the United States currency going up against the Japanese yen, while others are speculating that the euro will become the main trading partner of the dollar.
Many of the big institutions that make billions of dollars in profits in the banking industry are making bets against the dollar. The International Monetary Fund has recommended that the dollar is worth more than the Euro. Many banks have already been hedging against the euro and the dollar.
Even though the Euro was stronger last year than it is today, it is still losing ground to the dollar. As the dollar has gone lower, so has the Euro.
The big question is whether the US will decide to strengthen the dollar to devalue the Euro. If the US does not respond in a positive way, it is possible that the Euro may continue to strengthen against the USD, JPY, and the Euro itself.
As long as there is no follow through on this announcement by the Euro, the dollar might remain relatively strong in the interim. Investors are anticipating the US Federal Reserve to ease up on interest rates in September, and as a result, the dollar is expected to weaken against the USD, JPY, and the Euro.