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Euro Debt Crisis

EURO DEBT CRISIS

A popular journal in Greek stated Greek debt crises focused less on the crisis and more on the market reaction. It also stated that Hedge Funds Try ‘Career Trade’ Against Euro” and “Speculators Bet Record Amount against Euro for 4th Week” and “Europe Trouble, U.S. Opportunity” in the headline. It explains the collapse in the Euro mainly against the dollar as one of the important and profitable techniques for exploiting the crisis. The debt crisis has become self fulfilling both for Greece and Euro, both Greek and Euro bonds lost their value which makes the crisis more badly. Most of the speculators are using this favorable condition by making more bets against Euro. Based on the viewed commitment of Trader’s report, the net short conditions against the Euro have a record 12 billion dollar. Some analysts took these details at face value. 

There is also proof that most of the speculators are now trying in concert to bring down the value of Euro. The magazine also mentioned about the private meeting between Hedge funds managers and investment banks helping their customers bet against Euro by using derivatives. These speculators influence the currency markets. The Euro has down 10 percent in less than three months which is more surprising for a currency whose daily trading volume is calculated at 1.2 trillion dollars. The famous choice trade is based on the Euro falling to party against the dollar. It is also not in the good position to accept the market power that these speculators have.

But emotion has no place in forex trading. EU member states contain shaky finances which cannot be dismissed. The Euro is controlled by the European central bank over which Greece has no power. Usually in the forex trading investors like to buy one currency because they think it is going to appreciate in its value against other currencies. If all the investors have same sentiment, these purchases will cause the Euro to appreciate and the dollar will depreciate. In the European debt crisis of 2010, some countries in the European Union were at danger to default on their debt. 

This caused the Euro to fall down so investors look for the other currencies. The three big safe havens are the Treasury bills, U.S dollar and gold. These investments are regarded as less risky of all investments. The strength of the Euro is currency stability. Businesses will not face any risk from currency exchange rates and tourists also no longer to pay the price of the currency conversion. But the weakness is the Euro using countries are not able to set their own monetary policy and they should act according to the policies which are drawn by the European central bank. Greece is unable to devalue its currency to keep prices stable and increase exports to increase money. So forex traders always should keep an eye with the fluctuations of the currency value to operate their forex trading successfully. This helps them to avoid unnecessary frustration in forex trading.

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