U.S. Dollar Falls in Forex Trading as Deficit Worries Loom

by Trader Rich

Bailout cost could exceed trillionThe U.S. dollar is falling in forex trading on the currency market as worries begin surfacing about the national deficit. As anyone will tell you, have large amounts of debt on the balance sheet is a bad idea, and the U.S. is getting there. At a much faster rate than before.

The bailout proposed over the weekend, although put at 0 billion, may ultimately cost more than trillion. At Blogworld this weekend, in a session on the financial markets, some of the panelists put the cost at trillion to trillion.

Obviously, such a state of things does not bode well for the U.S. dollar in the long run as it stacks up to other currencies in FX trading. Such a large deficit shows that the economy is struggling, and it becomes tempting for investors to take their money elsewhere.

Indeed, Bloomberg reports on a change in forex strategy, brought about in large part by worries over what this financial mess is going to do to the stability of the economy, and to the U.S. dollar in currency trading:

“The massive increase in the deficit is starting to make people rethink the shape of all sorts of things, including the dollar,” said Alan Ruskin, head of international currency strategy for North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. “We have shifted from the mode of buying dollars on dips to selling the dollar on upticks.”