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Friday, October 24, 2008

Foreign Exchange: US-Dollar firm against major currencies

Author Thomas Ramseyer
Foreign Exchange Market observed

The US-Dollar has constantly been weakening for almost since 2001.

The major currencies’ exchange rates have deteriorated against the US-Dollar starting July to September 2008 by rounded 16% to 24%.

GBP –24%, JPY –22%, EUR –20%, CAD –17%, CHF –16%

Who has been selling all those currencies, thus actually buying USD?

Possible backgrounds may be:
1) USD-area residents convert and repatriate foreign money denominated proceeds from investments derived from business acitivity as well as from disposal of assets.

2) Speculative transactions by all sort of market participants

3) Joint activity of Central Banks.

4) Mixture of all the above stated.

With everybody - Central Banks included - doing the same the foreign currency reserves of all countries diminish whereas all developed countries' money supplies are to boost.

This situation being very delicate Central Banks must monitor the variety of economic indicators thus being able to maintain a serious management of the money supply. The latter being severely neglected sooner or later the phantom of inflation will be to emerge.

copyright Thomas Ramseyer