Get Started Investing in Forex: 37 Tutorials, Tools & Resources

Even if you’re an active trader in stocks, you may not be prepared to invest in forex, or the foreign exchange market. Forex trades 24 hours a day from 5:00 p.m. ET on Sunday until 4:00 p.m. ET Friday, so you won’t hear those opening or closing bells. And, there’s no central market like the New York Stock Exchange or Nasdaq. Instead, trade is conducted between participants through electronic communication networks (ECNs) and phone networks in various markets around the world. So, when you hear that the US dollar closed at a certain rate, it simply means that was the rate at market close in New York. But currency continues to be traded around the world long after New York’s close.

Get Started Investing in Forex: 37 Tutorials, Tools & Resources

Even if you’re an active trader in stocks, you may not be prepared to invest in forex, or the foreign exchange market. Forex trades 24 hours a day from 5:00 p.m. ET on Sunday until 4:00 p.m. ET Friday, so you won’t hear those opening or closing bells. And, there’s no central market like the New York Stock Exchange or Nasdaq. Instead, trade is conducted between participants through electronic communication networks

Markets await data, Fed for USD

While the USD appears to be trending downward these days, commentators note that the currency is actually traveling sideways, as market participants look for cues indirectly from economic data and directly from the Fed. Many pundits feel the economy is resting precariously on the back of the housing market, and are anxiously waiting for the data to provide guidance either way. Already, a spate of bad news surrounding one sector of the mortgage market coupled with disappointing data on new home sales are worrying investors. Ultimately, however, the USD will live or die by the Federal Reserve Bank’s reaction to this news. In fact, the Fed’s Open Market Committee is scheduled to meet today and tomorrow, during which point it is expected that interest rates will be held constant. The Wall Street Journal reports:

Analysts will also be watching for any changes to the Fed’s inflation outlook, particularly after Friday’s stronger-than-expected consumer-price report.

Read More: Dollar Treads Water, Waiting for the Fed

China raises interest rates

China’s Central Bank, in an effort to rein in the nation’s runaway economy, recently raised the country’s benchmark lending rate by 27 basis points. With most countries, an increase in interest rates would propel the country’s respective currency upward in value, as risk-averse investors would bring capital to that country’s bond markets. In the case of China, however, monetary policy tends to have a pretty negligible effect on the currency, primarily because the Yuan remains pegged to a basket, and its appreciation is being carefully managed by the government.
Read More: China announces 0.27 percentage point increase in key interest rates

US trade deficit not a concern

While the figures are still being calculated and confirmed, it looks like 2006 was the worst year ever for the US trade deficit, which is estimated to exceed $800 Billion. Economists have long argued that such an aberration is not sustainable in the long run and that the USD must fall in order to make goods and services relatively less expensive from the standpoint of foreigners. Now, however, economists are beginning to question this logic, by arguing that due to underdeveloped capital markets abroad, foreigners will continue to favor the US as a place to invest their assets. In hindsight, it looks like forex markets were ahead of the curve, since the failure of the USD to fall against other currencies despite its burgeoning deficits signals an utter lack of concern among forex traders that this is an important issue. The Economist reports:

If global imbalances are the result of such frictions, they are unlikely to unwind quickly. Financial systems, after all, do not mature overnight.

Read More: Sustaining the unsustainable

China FX Firm to Manage $200 Billion+

Several months ago, China announced that it would sponsor the creation of several state-owned investment firms that would be charged with managing China’s ever-growing stock of foreign exchange reserves. This week, China unveiled further details, indicating that the first one of these investment firms will be capitalized with $200-250 Billion in assets. This firm will use the proceeds of a bond offering for such an amount to buy forex reserves directly from China’s Treasury, with the explicit goal of earning a return in excess of the