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Economy vs. Currency question

C

Casawi

Platinum Member
We all know the economy is not doing so well and DOW is taking a hit. But now the USD is worth more of my country's currency?
I don't completely understand why.
One way to look at is that my country's economy is doing even worst, but I don't think that explains it all.
I always find myself puzzled about this.

I guess my question is what is one country's economy and its currency relation that explains this trend?

Thanks,
 
Originally posted by: AccruedExpenditure
Originally posted by: LegendKiller
What country are you in?
Click to expand...
Click to expand...

Apparently you live in Morocco

According to Wikipedia Morocco's three largest drivers of GDP are
1.) Mining of Phosphates
2.) Remittances from Foreign Nationals
3.) Tourism

All these industries are likely to largely effected by a global downturn. While not a perfect barometer exchange rates in part reflect the growth or contraction of GDP
-AE
 
US credit crunch has lmited the supply of dollars making them more valuable.
Investors in foriegn currency are getting nervous and selling.
There are probably others but I believe those are the main two.
 
Originally posted by: nickbits
US credit crunch has lmited the supply of dollars making them more valuable.
Investors in foriegn currency are getting nervous and selling.
There are probably others but I believe those are the main two.
Click to expand...

That is what my dad said, so this $700B will essentially kill the dollar again?
 
Originally posted by: AccruedExpenditure
Originally posted by: AccruedExpenditure
Originally posted by: LegendKiller
What country are you in?
Click to expand...
Click to expand...

Apparently you live in Morocco

According to Wikipedia Morocco's three largest drivers of GDP are
1.) Mining of Phosphates
2.) Remittances from Foreign Nationals
3.) Tourism

All these industries are likely to largely effected by a global downturn. While not a perfect barometer exchange rates in part reflect the growth or contraction of GDP
-AE
Click to expand...

I mean last time my mortgage was like $1100, this month it looks like it is only going to be $1000.
 
It's not really the credit crunch or the scarcity of dollars.

What it comes down to is that the world thought that the US' woes were "delinked" from the world. Whatever happened here, stayed here. Since the world could consume goods that were shifted from an ailing US, to other countries, it was thought that a US recession wouldn't hurt international players.

However, the problem with that, is that you just can't replace the world's largest investor *and* consumer of goods.

Everybody is slowly realizing that the cold that the US catches is the one the world eventually catches.

Add to that demand for US Treasuries, which is a flight to safety, is driving demand for the dollar, while demand for Euro Treasuries, as well as worldwide goods, drops demand for Euro and worldwide currency.

It's all relative movements of the economies, demands for goods produced by those economies, and investing into those economies.

Look at the Yen right now, it's skyrocketing relative to other currencies. Not because Japan is doing so much better (Honda and Toyota got smacked last week), but because the yen carry trade is unwinding. That drove borrowing in Yen at low rates, dumping of Yen onto the world markets into different currencies (dollar and others). Now the carry-trade is reversing, as people need that money at home, they are repaying Yen loans (which they need Yen to do that, spurring demand for Yen).
 
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