The Aussie dollar is getting smashed by most major currencies as the US posts some of its strongest results in the past 21 years.
The reality could not be more different.
A slight change in a single currency can cause a gigantic rippling effect across the economy.
Sound too extreme?
Remember what happened to Greece with the euro not long ago?
The collapse of an economy.
And the other 24 countries using the euro were adversely affected too. However, they were able to cope with the damage.
OK, maybe that was a crazy one-off.
Or was it?
The truth is, we see the way our AU dollar shifts compared to other currencies every day on the five o’clock news.
And we feel the disappointment when, in preparation for a holiday, we hand over AU$1000 and get, say, £550 in return. Or maybe $700 USD. Sometimes more, sometimes less. Depends on the day.
And that’s the point.
Every day, currency is changing the global economy.
Economic Effects of Currency Fluctuation
Currency fluctuation can lead to changes in the economy.
For one, it affects market competitiveness. If a currency appreciates relative to others, the national economy will experience greater internal pressure. This may lead to dormancy, which means less jobs and a slower economy. Not good.
Alternatively, a weak currency can attract investment. But that also means the economy is in the hands of big investors. Also not good.
And obviously, currency variation can lead to inflation. Also a ‘bad’ thing, though it can have positive effects on certain pockets of the market. Precious metals, for instance.
The way fluctuating currencies affects investment is important to us here; in fact, the ‘good timing’ which we tend to associate with investing mostly depends on the changing values of currencies.
It’s all about buying in when weak and selling when strong.
But with constant fluctuation comes unpredictability.
Unless you’re well-informed, that is…
Stay on the Look Out
Learn why it’s more accurate to think of the currency market as an unrestricted, unregulated and dynamic zone open to interventions, rigging and fixes.
It can lead to all sorts of traps for the unwary investor.
But we’ll try to make sure you’re on the right side of the trade.
And we’ll keep you up to date with all kinds of currencies, including the kind you can’t hold in your hands. Like cryptocurrency.
Feel out of the loop yet?
Don’t worry. Keep your eye on this page and you’ll never miss a beat — or rather, a cent.
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