Forex Fixation on Interest Rates

This past week the US stock market sold off sharply from record highs to finish the week with the worse performance in four years. Yet the US Dollar reversed its recent downward spiral and finished higher against all major currencies.

This seemingly perverted behavior was in fact forecast several weeks ago in a posting called US Dollar Strength Forecast.

As discussed in the posting the prospect of an old fashioned credit crunch springing from the Bear Sterns hedge fund disaster has spooked investors worldwide. The prospect for sharply higher interest rates in the US is now being considered as seriously real.

The foreign exchange markets will often focus on interest rate differential between currencies. As rates increase at a faster pace in the US compared to that of other nations look for continued strength in what from most viewpoints should be a seriously weak Dollar.

For more information about the developing crisis environment for stocks and US Dollar movements visit our sister site Investment World Today.

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