I was wondering what the effect of bailout package would be on the USD, and especially the AUD/USD pair. I think, since it entails printing almost a trillion USD and pumping it into the market, it causes significant dilution and hence causes an erosion in value. So I think that AUD is going to appreciate strongly against USD.
However, a contrarian view is that the bailout could start a resurgence of the Amrerican economy and could actually lead to a rally in the dollar.
As someone that would like to think of myself as trading on fundamentals, I am a little perplexed about this. I was hoping someone could add some info and make things a little clearer.
Does the bailout mean they will actually print new money? I don’t recall hearing talk of that. If so maybe the the new money being a negative and the added liquidity being a positive could cancel eachother, and it’s business as usual.
The IRS should be auditing all the rest of the big institutions to look for impending trouble, because how many more of these can the US take?
I think the generall consensus is that the bail out will depreciate the dollar.
That said trading this past week did not give any real indication of that, which is odd in itself. I would be of mind to sit out trading till the “bail out” is delivered, and watch how the market responds, as of now the market seems to be being manipulated.
I wonder if the bailout will have much effect on the dollar at all. They will not spend much of the money unless they must, it’s just an authorization to spend if needed. Then they will repackage and auction off OR hold for a while until the government can sell whatever they acquire for a possible gain.
I assume you are all here because you want to
make it rich trading FX right? Learn to think
big and bigger then.
Only poor people think this is a bad situation.
While people are suffering and will suffer, smart
people who managed their money well are still
doing well and may even do better in the future.
When others fail and when things depreciate
artificially, they will get a bargain and will be able
to make tremendous amount of money when the
economy and price picks up again and it will happen
quicker than you think.
The only problem is that the moron who were running
the hedge funds, mortgage lending, and derivative
based complicated BS investment vehicles won’t suffer.
They all need to be investigated by the FBI, SEC, and IRS
and most of them need to go to prison after the bailout
is done with. We need to put an end to bad business
practices and lousy hedge funds run by retards that
make $200 million in bonuses no matter what happens.
Being fired is not enough for these rejects; they all need
to spend some time in Federal prison for at least 10 years.
What did they pull off? Majority of them will now
be investigated by the FBI and some of them will
head off to Federal prison. They are smart?
What did they pull off when you get caught?
Go admire some real decency in life instead.
These scums all need to go to prison.
They were smart to pull it off only to get
caught? These scum moron imbeciles all need
to die.
When this bailout idea was materialising, this is what went thorugh my mind. I thought that in the case it was passed, the US treasury should be printing a whole lot of USD which would cause its value to deteriorate against other currencies and hence I should be shorting the USD. It sounded like a pretty no-brainer to me and I jumped into the trade.
What happened next was a lesson in misery. The USD rallied like there is no tomorrow, and it went up nealy 3 percent against the USD thereby robbing me off my sleep and hard earned money.:-).
What’s even more funny was that, it continued to rally even after the US congress voted the bill down. That completely perplexed me. Now I am licking my wounds and am still looking into how I could explain the way USD behaved over the past three days.
Any help would be really appreciated. As the saying goes, “fools learn from experience, wise men learn from fool’s experience”. Needless to say who the fool is here.
I found this great article it should answer your questions and explain the situation that the US id facing and what they want to do to overcome it. Forex News Miapierson’s Weblog
my view is that in the short term, the bailout is going to make look the dollar stronger, but the way I perceive it what happens is tthat the bailout affect other currencies initially and the dollar recovers, in a more long term surely dollar will become weak against most of the currencies
The purpose of the plan is to restart business in the credit markets. If, and that’s a big “IF”, it passes then maybe business will resume between banks, institutions, etc all the way down to small businesses. That’s the possibility and it will be a slow recovery process if that scenario does happen. We may see a quick rally in USD/JPY…but after that, “what’s next?” Some of the negative US Dollar points are: there’s still a failing housing market, US Jobs data is not looking too great, and there’s still a huge de-leveraging that is taking place that will continue to depress asset prices. Let’s not forget speculation of a US recession and possible Fed rate cuts. All bad for the US Dollar.
But there’s one good point for the Greenback, and that’s the sentiment that the rest of the global economy is getting hit hard and investors are flocking out of higher yielding currencies and back to the US Dollar as a safe haven. We’re seeing this in EUR/USD, GBP/USD, and the Comdolls…(also carry trades are de-leveraging, positive for the Japanese Yen).
So, IMHO, I think that if the plan gets passed tomorrow, we’ll see an initial rally in USD/JPY and USD/CHF, that will just be an opportunity for traders to play the USD negative points i talked about next week. And EUR/USD, GBP/USD and comdolls will continue to drop. If it doesn’t pass, then we may see USD/JPY and USD/CHF fall right away…again, just my opinion and as crazy as this environment is…really, anything can happen…
I have been checking the behavior of the market and I haven�t see something strange or weird so Do we have to wait to see the consequences of the bailout plan or it�s going to happen a big change???
I think this is a question of risk and uncertainty.
If the bailout gets passed, the general perception of the US markets will be positive as there will be less uncertainty and the decision will ultimately strengthen the financial markets, and provide stability for the USD…at least in the short term. In the longer term adding to the national debt is not a wise idea, and the effect of doing so will become evident later.
If the bailout does not get passed, the opposite will occur, and the short term move from the announcement will be negative for the USD.
Another contrarian view could be that if the bailout does not pass, there is more risk in the world, so higher yielding currencies will decline as people move away from riskier instruments…
Whatever the decision, if i do trade it will be on a lower timeframe than my normal 30 mins to take advantage of volatility…
Well as we all must of read a couple a minutes ago the House revoted and approved the Bailout plan by a goo d margin. So I hope this Bill works for us Americans.