Currencies Trading All Over the Map: Wild Swings Confuse Investors, Hamper Trade Currencies including the dollar and the euro have entered a period of extreme volatility that is hindering global commerce and adding further uncertainty to a world economy facing its worst downturn in decades.
Over the past several months, global exchange rates have taken some of their wildest swings in years, with a fresh bout of zigzags hitting an array of currencies in both rich and poor countries in the past few weeks. That has humbled some of the strongest and most time-honored of coins, like the British pound, while fortifying others, like the Japanese yen.
Many currencies are shifting directions like a sailboat in a storm, causing unpredictable shifts in exchange rates that are further worsening the outlook for global trade as they confront buyers and sellers of internationally traded goods with another ill besides slumping demand: rapidly changing prices.
Over the past seven days alone, for instance, the Australian dollar shed nearly 10 percent against the Swiss franc. That means an Australian steel company with a contract to sell beams to, say, a Swiss construction company would be forced to take a significant haircut on those sales. As a result of the swings, exporters from Brazil to Baltimore say they are pushing for shorter-term contracts and boosting their purchases of foreign exchange hedges.
"Honestly, we just don't know how to analyze these currency markets properly right now," confessed David Bloom, head of currency markets for HSBC in London. "We're now in an unconventional world where you're getting huge movements that are no longer grounded in the conventional models. So currencies are lurching this way and that, and it's creating a huge uncertainty."
Over the past several months, global exchange rates have taken some of their wildest swings in years, with a fresh bout of zigzags hitting an array of currencies in both rich and poor countries in the past few weeks. That has humbled some of the strongest and most time-honored of coins, like the British pound, while fortifying others, like the Japanese yen.
Many currencies are shifting directions like a sailboat in a storm, causing unpredictable shifts in exchange rates that are further worsening the outlook for global trade as they confront buyers and sellers of internationally traded goods with another ill besides slumping demand: rapidly changing prices.
Over the past seven days alone, for instance, the Australian dollar shed nearly 10 percent against the Swiss franc. That means an Australian steel company with a contract to sell beams to, say, a Swiss construction company would be forced to take a significant haircut on those sales. As a result of the swings, exporters from Brazil to Baltimore say they are pushing for shorter-term contracts and boosting their purchases of foreign exchange hedges.
"Honestly, we just don't know how to analyze these currency markets properly right now," confessed David Bloom, head of currency markets for HSBC in London. "We're now in an unconventional world where you're getting huge movements that are no longer grounded in the conventional models. So currencies are lurching this way and that, and it's creating a huge uncertainty."
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