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People have misconceptions that "Forex is just for short-term traders and they can get rich quickly," which is partially correct but also a popular myth.
The FX market, in its current form, is a relatively new innovation. The Foreign Exchange Market is a place where currencies are traded. It is the world's only wholly nonstop and regular basis trading market.
In the past, the forex market was dominated by institutional corporations and large banks acting on behalf of clients. However, it has become more retail-oriented in recent years, and Traders and investors of various holding sizes have started to participate.
When the Bretton Woods agreement began to fall apart in 1971, more currencies were allowed to float smoothly against each other Individual currency prices vary according to supply and demand, and foreign exchange trading firms keep track of these movements.
Here, I tried to summarise today's top news to briefly overview the forex market.
As the Fed's hawkish stance caps losses,
the dollar is down but near a two-year high
In Asia on Thursday morning, the dollar was lower, but still at a two-year high, as the Federal Reserve of the United States maintained its hawkish position in its latest meeting minutes.
By 11:59 p.m. ET, the US Dollar Index, which measures the greenback against a basket of other currencies, had fallen 0.01 % to 99.605. (3:59 AM GMT). Overnight, the index reached 99.778 for the first time since May 2020.
The USD/JPY exchange rate fell 0.07 % to 123.7.
Dollar is rising as the Federal Reserve prepares to intensify its anti-inflationary efforts
On Thursday, the dollar held near a two-year high versus a basket of currencies as meeting minutes revealed the Federal Reserve was planning aggressive action to combat inflation.
The US dollar index, which compares the greenback to six major currencies, hit a high of 99.778 overnight and stayed steady at 99.575 in early Asia trade.
As oil prices fell, commodity currencies retreated from recent highs, and the euro fell to a one-month low of $1.0874. In early trade, it recovered to $1.0911.
On the potential of significant Fed rate hikes, the US dollar has jumped to a near two-year high
On Wednesday, the dollar soared to a nearly two-year high after minutes from the most recent Federal Reserve meeting bolstered expectations of several half-point rate hikes to rein in surging inflation.
The dollar index, which compares the value of the greenback against six major currencies, rose to 99.7780, its highest level since late May 2020. It was the last trading at 99.588, up 0.1%.
Minutes revealed that Fed officials saw the large rate hikes as appropriate for future sessions, especially if inflation pressures worsened. At the March meeting, they also wanted a 50-basis-point increase in the federal funds rate target range.
In the short run, the AUD/USD will be capped, but the declines will be minor
Brief comments from Westpac on the AUD/USD outlook over the next one to three months: Since Russia's invasion of Ukraine, the Australian dollar's typical sensitivity to risk appetite has mainly been limited to intra-day swings.
Since the invasion, the Australian dollar has remained the strongest currency in the G10, followed by commodity-linked currencies. Clearly, the unprecedented rise in energy and commodities prices has bolstered Australia's already sizable trade surpluses.
Nonetheless, the RBA's sluggish approach to ultimately starting tightening contrasts with the FOMC's open discussion of 50bp rises. Furthermore, CFTC data reveals that many A$ shorts have now been unwound.
This should help cap AUD/USD in the 0.7650/0.7700 area near term, though we expect dips to be modest multi-month.
Invasion Losses are Erased, Default Risks are Reduced, and Sanctions are Lifted
The Russian currency has recovered from its significant losses in the weeks following President Vladimir Putin's deployment of soldiers into Ukraine.
In Moscow trade, the currency surpassed the level of 81.16 per US dollar, which it had reached the day before Putin launched his onslaught. The ruble's gains came as the European Union and the United States coordinated a new round of sanctions against Russia, and the Finance Ministry announced that its attempt to service debt in dollars had been denied, potentially putting the country on the verge of default.
The ruble plummeted after the invasion on Feb. 24 due to a slew of international sanctions, virtually ending its status as a freely traded currency.
In choppy market movement, the GBPUSD is slightly higher
GBPUSD is fluctuating. Higher by a small margin. In a tumultuous trading day, the GBPUSD is slightly higher on the day (closed yesterday at 1.3070 and currently trades at 1.3076).
The introductory move in the GBPUSD was to the downside, building on yesterday's down day, which saw a price break higher (above the 100 and 200 hours MAs and a downward sloping trend line), only to retrace dramatically down, aided by dollar purchasing in response to the Brainard comments.
The recent low fell below last week's low of 1.3049, but it could only go to 1.3043 before reversing back to the upside.
This is a short daily review of the overall forex market; hope traders can see an overview of this market and get benefits.
