HomeFederal Reserve chief Ben Bernanke has recently announced the Federal Fund rate and the discount rate in the United States each reduced by a further 0.25%. Thus, the number of recent rate cut by the Federal Reserve to nine since August last year.- Money rates
What does it mean if the Fed does so, and what are the potential impacts may, on the foreign exchange rates and forex trading have market?
The prices set down by the Federal Reserveinterest on loans from banks meet each other in federal funds and loans, which it directly from the Fed. To set the reference point on which all the interest that you have set and me. Bank loans, interest rates, mortgage interest, your savings account's interest rate, the cost to finance a new car or save a new home ' the interest rate on the money or credit in relation adjusted to take these two sentences Federal Reserve. Ifthey are reduced, so the interest rates for everyone.
How is the Forex trading? Well, yes, to a large extent.
The main purpose of lowering the Fed interest rates will strengthen the trade. Lower interest rates make it less advantageous for investors and consumers (that's us) to keep their dollars because their dollar holdings generate less interest income for them, presumably so that consumers spend more of their dollars instead. Furthermore,Consumers with cheap loans (less interest on loans means lenders would once again lower wages) for larger purchases. This has to be done very carefully, so that does not break out of inflation.
As for investors ' even they find it less favorable to hold dollars, for the same reason. They would try to sell their dollars and move their money into alternative asset classes: stocks, bonds, commodities, real estate, but also ' foreign currency, because with the interest ratereduced to the dollar, the share of interest is tipped in favor of foreign currencies.- Money rates
And that, is where the forex point to lower interest rates that may have the potential sellers of dollars difficulties buyer for its U.S. dollar. With supply and demand is increasing decline, the dollar would be sold cheaper ' that is, would the exchange rate of currencies to rise against the dollar. READ MORE http://www.moneyrates.equitylinesite.com/2009/10/08/foreign-currency-exchange-rate-and-interest-rate-federal-reserve-rate-reduction-effect-on-forex/
