Asset Classes

Currencies

A system of money in general use in a particular country.

More About Currency

  • The currency markets tend to note changes in the global financial system before other asset classes
    • This is because currencies are the largest, most-trade and most liquid markets
  • Currencies rarely have extreme gains or losses because they are all relative (they trade in ranges)
      • Currencies are priced against each other
      • Except for hyperinflation, they rarely go to zero
      • It is also rare for them to make huge gains
    • Countries can attempt to maniuplate their currencies for gain:
      • Lower currency values can help increase exports (they are cheaper) and decrease imports
      • Lower currency values can help generate inflation 
      • VS. strong currencies which help drive deflation (imports cheapen)
      • The political party in power may want a cheaper currency in order to boost the economy (and their prospects of staying in office)