It has been reported by the Washington Post that the Fed and the Treasury are in the midst of finding buyers for Lehman Brothers. After Goldman Sachs reported that it would not be acquiring the investment giant, shares of Lehman tumbled as renewed doubts over the sale of the company overcame investors. Bank of America on the other hand has been reported as being one of the interested buyers involved.
What does this mean for the forex market?
Investment confidence has been shaken as the perceived safety of stocks continues to decline. As such, the only alternative for those unwilling to invest in equities is not the commodities market, but the cash market instead. Since the Euro and British Pound are expected to continue their decline on further ECB and BOE rate cuts, the only viable currency to hold is that which is not expected to lose value from decreases in interest rates. These two currencies are the Dollar and the Yen. Today Japan revealed its second straight quarterly GDP decline, however, the Yen refused to sell off. Furthermore, the shakeup in equities further adds to volatility, thus making carry-trade unwinding much more desirable.
[B]Written By Luis Gil, DailyFX.com
E-mail: <[email protected]>
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