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In our last lesson we continued our free forex trading course with a look at why the US Dollar is still king of the currency world. As expected, this lesson generated a lot of debate, so in today's lesson we are going to look at whether or not the US Dollar will remain the king of the currency world.

As we discussed in our last lesson the US Dollar is involved in approximately 89% of all forex transactions, so the fate of the US Dollar has huge implications not only on the US Dollar, but on the forex market as a whole. While currently the US Dollar is still king of the currency world, many argue that the tides are changing, and that the US Dollar is in danger of losing this status. Whether or not this happens, to what extent it happens, and if it does happen how quickly or slowly it happens, is of huge importance to currency traders.

The most important reason why the US Dollar is king of the currency world is the fact that, as we learned about in our last lesson, it is the world's reserve currency. According to Wikipedia.com, as of 2007 there is approximately $7.5 trillion worth of currencies held as reserves by central banks around the world. Of that $7.5 trillion 63% or 4.7 trillion is held in US Dollars. This is an enormous amount of dollars being held by central banks outside of the United States, so forex traders watch closely anything that could show a decrease in the appetite of central banks for US Dollars.

Like with individuals and companies, other countries willingness to lend money to the United States (by holding US Dollar Denominated Debt as reserves) is based on the financial soundness of the United States as a whole. As we learned about in module 3 of this course, the US has run a large current account deficit for years. In addition to this, the country's government has also run large budget deficits. Like an individual who runs up large amounts of debt, this makes the debt of the United States less attractive, and has the potential to decrease other countries willingness to fund these activities, by holding US Dollar Denominated debt as reserves.

Secondly, many consider the monetary policy of the United States to be flawed, citing the Federal Reserve's increase of the money supply to hold interest rates low, as a major factor in the dollar's decline. As we learned about in our lessons in module 3 of this course, the lowering of interest rates tends to weaken the value of a currency all else being equal. As the value of the currency falls, countries around the world who hold that currency, see wealth evaporate due to the falling value of their reserves. This obviously has the potential to make the US Dollar less attractive for them to hold as their reserve currency, which means a decrease in demand, and a decrease in the value of the currency all else being equal.

As of this lesson the US Dollar has fallen over 35% in the last several years, as measured by the US Dollar Index. As we just discussed, this decreases the wealth of the countries who hold the US Dollar as their reserve currency, and has the potential to reduce their appetite for US Dollars, regardless of the reason for the decline in value. This potentially means a decrease in demand from the central banks to hold US Dollars as their reserve currency, and a decrease in the value of the currency, all else being equal.

1. An Overview of the Forex Market
2. The Difference Between Over the Counter (OTC) and Exchange-Based Markets
3. Who Really Controls the Forex Market?
4. The Role of the Retail Forex Broker
5. How Central Banks Move the Forex Market
6. How Banks, Hedge Funds, and Corporations Move Currencies
7. A Breakdown of the Forex Trading Day
8. Forex Trading - Characteristics of the Main Currencies
9. Setting Up Your Forex Trading Software
10. Forex Trading - How to Read a Currency Quote
11. Forex Trading - Understanding Currency Rate Movements
12. Forex Trading - Understanding the Bid/Ask Spread
13. How to Place Your First Forex Trade
14. How to Determine Your Position Size in the Forex Market
15. Forex Trading - Pips and Fractional Pip Pricing
16. How to Calculate Forex Trading Profits and Losses
17. An Introduction to Leverage in Trading
18. How Trading on Margin Works
19. How to Calculate Leverage in the Forex Market
20. How to Calculate Leverage in the Forex Market Part 2
21. How to Place a Market Order in the Forex Market
22. How to Place a Stop Loss and Take Profit Order in Forex
23. How to Place A Pending Entry Order in the Forex Market
24. How Rollover Works in Forex Trading
25. How Rollover Works in Forex Trading Part 2
26. Free Forex Charts Userguide
27. What Moves the Forex Market? - Trade Flows
28. How Capital Flows Move the Forex Market
29. The Current Account: How Forex Traders Can Use it to Identify Opportunities
30. Interpreting the Capital Account and Measuring Capital Flows
31. Fundamentals that Move Currencies - Balance of Payments
32. How Interest Rates Move the Forex Market Part 1
33. How Interest Rates Move the Forex Market Part 2
34. How To Trade the Carry Trade Strategy Part 1
35. How To Trade the Carry Trade Strategy Part 2
36. How To Trade the Carry Trade Strategy Part 3
37. Fundamental Analysis Vs. Technical Analysis in Forex
38. Forex Trading Fundamentals Quiz - Test Your Knowledge
39. Why the US Dollar is Still King
40. Determining the Fate of the US Dollar
41. Determining the Fate of the US Dollar Part II
42. Determining the Fate of the US Dollar, Part III
43. Economic Releases that Move the US Dollar
44. A Trader's Introduction to the Euro
45. A Trader's Introduction to the Euro, Part II
46. A Trader's Introduction to the Euro, Part III
47. A Trader's Introduction to the Yen
48. A Trader's Introduction to the Yen, Part II
49. A Trader's Introduction to the Japanese Yen, Part III
50. A Trader's Introduction to the British Pound
51. A Trader's Introduction to the Swiss Franc
52. A Trader's Introduction to the Canadian Dollar
53. A Trader's Introduction to the Australian Dollar
54. A Trader's Introduction to the New Zealand Dollar
55. Why Choosing a Forex Broker is so Confusing
56. Choosing a Forex Broker: Regulation and Financial Stability
57. Choosing a Forex Broker Part III: Transaction Costs
58. Choosing a Forex Broker, Part IV: Technology & Add-ons
59. Choosing a Forex Broker: Evaluating Customer Service
60. An Introduction to Forex Capital Markets (FXCM)
61. An Introduction to DailyFX Plus

This 61-video series is an introduction and in-depth look at the forex market, including how to place trades, the fundamentals of the forex market, profiles of the main currency pairs, and factors to consider when choosing a forex broker.



This is a continuation of The Basics of Trading course by Informed Trades.