How To Trade with the US Dollar

When it comes to foreign exchange, or forex trading comparisons, it may seem obvious to go with the most predominant currency on the market today: the United States dollar. After all, it’s been proven to be a worthy investment in recent decades, with investors seeing favourable returns and relative stability.

However, during the global financial crisis, some things have changed. First, it was the housing crisis, the collapse of a prominent bank, and an enormous, government-funded, multi-billion dollar bailout for the troubled banking industry. Additionally, the United States recently had their credit rating downgraded from triple-A to AA+. The country is struggling with a $14+ trillion national debt. Politics are interfering with the country’s ability to control its economic crisis.

With all this in mind, should you still consider the US dollar when looking at your forex trading comparisons? The answer is up to you, but despite its troubles, there is still some solvency left for forex traders looking to trade with the USD.

Let’s start with the US’s Federal Reserve. This is a separate entity from the federal government, which allows the members to focus on improving the economy and the value of their country’s currency without the threat of political backlash. With this in mind, there is at least a minimum standard of stability to be expected, especially with a currency that has been considered one of the most important players in forex trading for several years. The governors of the Federal Reserve are currently working to keep interest rates low for the country, which means that they are not yet expecting inflation.

However, the strong likelihood of the USD’s value going up ought to be taken into account when making forex trading comparisons with long term investment goals in mind. After all, with the Euro currently in a state of chaos and uncertainty and the next potential superpower- China- manipulating its own currency to keep it undervalued (in order to tamper down its raging inflation and keep exports high through artificially low prices), the US dollar is definitely likely to remain the frontrunner for quite some time.

With multiple currencies to choose from while determining forex trading comparisons, there are a few more negative aspects you must remember for the US dollar. While the value is expected to rise, there are also economic indicators that seem to be saying that rough times could still be ahead. With the risk of a “double dip recession” and further national debt problems amidst the unsettled political climate, and the Federal Reserve playing it safe, there is no guarantee of large returns for a while, but this is a common thought for most forex trading options right now. So, if you’re looking for long term gains and relative stability, the US dollar is still a good bet.

Kelly writes about forex trading online for Forex Trading Finder where you can compare foreign exchange brokers to get the best forex reviews.