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Table of Contents
Daily Market Analysis
Daily Strategy Analysis (Live FxAlerts)
Currency in Depth – USD
Marcello Ducille’s Underground System Demonstration
Question & Answer Session
Currency in Depth: USD It is always a good practice to get to know the commodities you are trading. In the Forex, the “commodity” is currency. Each currency has its own history, current events and impacting outsiders. Today we will study the #1 most commonly traded currency on the Forex, the USD.
Currency in Depth: USD The US Mint was found in 1792 and produced the first US dollar coins based on size and composition of the Spanish dollar. The Spanish, US silver dollars, and Mexican silver pesos circulated together in the US all as legal tender through 1857. A variety of other currencies were utilized as legal tender within their respective colonies, such as the ‘lion dollar’ in the Dutch New Netherland Colony (New York). With the Coinage Act of 1792 the US currency was tagged in value according to the composition of its coins. The Act called for 90% silver alloy coins in denominations of 1, 1/2, 1/4, 1/10, and 1/20 dollars; it called for 90% gold alloy coins in denominations of 1, 1/2, 1/4, and 1/10 eagles. The value of gold or silver contained in the dollar was then converted into relative value in the economy for the buying and selling of goods. This allowed the value of things to remain fairly constant over time, except for the influx and outflux of gold and silver in the nation's economy Image courtesy of google.com
Currency in Depth: USD In 1862, paper money was issued without the backing of precious metals, due to the Civil War. In 1878 the link between paper money and coins was revisited The Gold Standard Act of 1900 abandoned the bimetallic standard of coin composition and defined the USD as 23.22 grains of gold. Following this, gold coins were confiscated in 1933 and the gold standard was changed to 13.71 grains. This standard remained until 1968 when the USD underwent 5years of heavy variation of gold standard before the 1971 movement to free float the USD on international exchange. Image courtesy of wikipedia.com
Currency in Depth: USD Currently, the US government maintains over circulation of approximately 800 billion USD in cash money (primarily Federal Reserve Notes.]The amount of cash in circulation is varied by the Federal Reserve board. Eight times a year, the 12-person Federal Open Market Committee meets regarding monetary policy and overall goals. Five days a week, the Federal Reserve System engages in open market operations to carry out those overall monetary policy goals. If the Federal Reserve desires to increase the money supply, it will anonymously buy securities (ex. US Treasury Bonds) from banks in exchange for USD currency or vice versa to increase or decrease currency in circulation. Usually, the short term goal of open market operations is to achieve a specific short term interest rate. At other times, monetary policy might instead entail the targeting of a specific exchange rate relative to some foreign currency or relative to gold itself.
Currency in Depth: USD USD is often used as the standard unit in international markets for commodities such as gold and petroleum. In addition, the USD continues to be the world's foremost reserve currency. In addition to holdings by central banks and other institutions, there are many private holdings, in actuality most American banknotes are held outside the US. Economist Paul Samuelson, among others, have maintained that the overseas demand for USD allows the United States to maintain trade deficits without causing the value of the USD to depreciate as readily or the flow of trade to readjust. But Samuelson also recently has said he now believes that at some uncertain future period these pressures will precipitate a run against the USD with serious global financial consequences Image courtesy of wikipedia.com
Closing Notes The USD is the most widely traded currency on the Forex and the predominant reserve currency and international currency to date. Though it is a “strong” currency, its relative status to historical value is highly variable and its future tenuous. Regardless, the USD and the US economic factors still impact the Forex deeply across nearly every currency pair and trade making it an essential currency to learn.
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