The rippling affect of recession and economic slowdown in America has left the Australian dollar on a slippery surface. As of now the AUD (Australian dollar) in comparison to the US dollar, in terms of bidding and asking prices is 0.8800 to 0.8808.
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The year 2008 was bad, to put it mildly, in terms of recession and economic downturn/ slowdown in the United States of America.
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Credit risk or counter party risk arises out of the potentiality that outstanding positions on currencies will not be honoured as per contract due to a deliberate or unintended activity by that counter party.
Currency valuation of a particular country depends on a number of determinants. The major ones influencing such valuation are the economics of the concerned country including inflation, interest rates and trade deficit and, the social and political factors.
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Interest rate risk
Interest rate risk is one of the four risks associated with the worldwide foreign exchange market. It is relevant to the currency options and swaps, outright forward deals and, currency futures.
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A currency option is a contract between a buyer and a seller that gives the buyer the right, but not the obligation, to trade a specific amount of currency at a certain price on or before a certain date, regardless of the market price of the currency.
The staggering impact of US economy meltdown continues to haunt international forex markets and different stock exchanges across the world. Basically, US Dollar which is considered to be the most powerful currency in the world and continues to dominate the forex markets have been on a weak run ever since the sub prime meltdown hit the US economy around early 2008.
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