Forex Currencies

In times of great market upheaval trading Forex currencies has the potential to be very profitable. Today, for example, there is civil war in North Africa in the country of Libya and political unrest in several other nations of North Africa and the Middle East. These situations tend to drive investors to put their money in safe haven Forex currencies such as the US dollar, Swiss franc, and Japanese Yen. Then, of course, there has been a natural disaster of historic proportions in Japan.

The earthquake and resulting tsunami has caused terrible devastation on the Northeast coast of the home island. At first glance traders expected the Yen to fall in value due to the effects of the tsunami on the Japanese economy. Then Japanese investors started divesting themselves of offshore assets in order to pay for reconstruction at home. This repatriation of Japanese assets means that Japanese currency traders are buying Yen and selling other Forex currencies. The sum total of assets monetary assets being returned to Japan caused the Yen to rise significantly in price causing comment by the G7 economic ministers and intervention by central banks across the globe in order to maintain a stable market and pricing between the Yen and other Forex currencies.

As we noted above, trading Forex currencies can be very profitable at such times. There tends to be a great deal of volatility in the foreign currency markets and high volume trading as well. Those who know the fundamentals of the currencies that they are trading and who keep careful track of technical factors can often anticipate price swings and profit thereby. To the extent that the trader is duly concerned about background market manipulation or Forex conspiracy, it is probably less likely a factor at times like this as neither the Libyan civil war nor the Japanese tsunami were caused by market manipulation of Forex currencies. Market manipulation may become a factor at any time but for those who respond quickly to changes in the values of Forex currencies in a situation such as this it is likely that they will be trading in a fair market.

Using options in trading Forex currencies in times like these is often the best way to take advantage of what the market offers and reduce investment risk as well. By buying calls or puts on Forex currencies the trader locks in the right the buy, with calls, or sell, with puts, if a currency moves in relation to another as anticipated. If the market moves unexpectedly the trader limits his risk to the price of the options purchases and does not suffer the potentially substantial losses possible in an extremely volatile Forex market. While war rages in North Africa and Japan digs its way out of the rubble other factors still drive the prices of Forex currencies. For example, the PIIGS national debt issues have not gone away in the European Union and the USA still has a mounting national debt that threatens to further decrease the value of the US dollar. Thus the individual trading Forex currencies will be wise to keep all pertinent fundamentals in mind while trading in today’s Forex markets.