The US government’s moves to “stimulate” their economy will have a negative impact on the greenback

The Australian Dollar made a strong showing against the US Dollar as well.  Consumer prices fell the most in ten years which led investors hoping for large cuts in Australia’s interest rates as a device to curb offset the economic spiral that has also hit the Aussie nation.   The AUD hit .672 in early trading, a rise of more than 1%.  Along the same lines, the Canadian dollar also had a nice day against its neighboring currency.  According to the Daily FX updates the CAD rose more than 1% against the USD as the Canadian government pledged to cut billions of dollars in taxes as part of a stimulus package.  The CAD was trading at $1.208 in late trading Wednesday.

There is a big concern in the Forex market that the US government’s moves to “stimulate” their economy will have a negative impact on the greenback.  By pumping close to a Trillion dollars of money into the economy, the Fed is in effect raising its fiscal deficit to over two trillion dollars which will make it necessary for the US to increase borrowing and the printing of money which will dilute the value of the currency.  While investors see the US as a safe-haven, a passage of the proposed stimulus package, the second one in four months, might turn investors away from the currency and weaken the perceived strength of the USD in world markets.

In another alarming sign that things are getting worse before they get better, the International Monetary fund announced yesterday that they will run out of money if they had to address all the claims coming in for its help.  The IMF cut its global growth forecast to .5% revised down from 2.2%.  With so many countries in financial trouble and the main body responsible for helping economically challenged countries also experiencing difficulties – the outlook is bleak