Intermarket Review  |  JUL 2004

Intermarket Review by David Penn

Intermarket Review by David Penn EURO Originally poised to be both rival and complement to the US dollar in the world of foreign exchange, the euro’s miserable start in 1999 has become a stunning bull market by 2004. The euro is the currency of the 12 nations that make up the European Union (Belgium, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal, and Finland). AUSTRALIAN DOLLAR Heavily influenced by the role that commodity production and export play in the Australian economy, the Australian dollar (or “aussie,” as forex traders refer to it) is among the world’s foremost “commodity” currencies — along with the South African rand and the New Zealand dollar. BRITISH POUND When it comes to currencies competing against the US dollar, the British pound is third in line behind the euro and the yen. It is in some part the centrality of the London foreign exchange market that assists in keeping the British pound as widely traded as it is. Even so, most trading in pounds is EUR/GBP and GBP/ USD — that is, between pounds and euros, and pounds and US dollars. YEN The third most widely traded currency in the world — after the US dollar and the euro — the yen is, like the greenback and euro, considered a “finance currency” more affected by the fortunes of the Japanese equities, bond/interest rate, and real estate markets than by commodity production (as is the case with some other currencies).

by David Penn