What will be the Forex response to a United States Government shutdown? The US government has not passed a budget for five years. Rather legislators have repeatedly played chicken with the US economy as gridlock continually revisits the halls of congress. A group of Republicans in the House of Representatives allowed a budget bill to pass but only when the new health care bill, so called Obama care, was not funded. Americans are bracing for closure of national parks, a possible delay in social security and disability checks, and no processing of new paperwork for passports or anything for that matter. If the last five years are any guide the issue will be resolved at the last minute or before too many voters get too angry. But the Forex response to a United States government shutdown could affect the dollar forever. For example, when foreigners buy US treasury bonds they expect those bonds to be backed by the full faith and trust in the American government. What are the responses to bond buying and the Forex response to a United States government shutdown when Uncle Sam no longer pays his bills? Bonds, Yields, and the USD We noted recently that higher bond yields drive the dollar higher. Most recently this has had to do with the Federal Reserve quantitative easing stimulus program and its expected cessation. If the prospect of a slight change in yield causes a slight change in the dollar versus other currencies, what will happen when the international bond market loses all faith in US treasuries? Chaos may be too mild a term for a possible Forex response to a United States government shutdown. Eighty-five percent of all Forex trades include the US dollar. Most minor currencies do not trade one against the other. Rather they trade against the US dollar. If traders lose faith in the US dollar will they use the Euro, Yen, or another major currency? Foreign Trade The reason that Forex markets exist is to facilitate foreign trade. When an American company sells machinery to a company in the Europe it expects to be paid in US dollars. However, if the dollar is unstable they may rewrite the contract to be paid in Euros. How will those doing business internationally deal with a possible Forex response to a United States government shutdown? What Are Your Options? The Forex response to a United States government shutdown could be dramatic with the dollar losing significant strength or the market could simply assume that once grandstanding on Capitol Hill is over that things will revert to normal. Trading currency options may be a good approach to this sort of uncertainty. The advantages of buying calls or puts on the dollar are that losses are limited to the price paid for the contract, the buyer can exercise the contract any time within the contract period should price changes warrant, and he can simply sell his contract for a profit and never really engage in online currency trading.

1. Forex Response to a United
States Government Shutdown
By: www.TheForexNittyGritty.com

2. What will be the Forex response to
a United States Government
shutdown? The US government
has not passed a budget for five
years. Rather legislators have
repeatedly played chicken with the
US economy as gridlock
continually revisits the halls of
congress.
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

3. A group of Republicans in the
House of Representatives allowed a
budget bill to pass but only when
the new health care bill, so called
Obama care, was not funded.
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

4. Americans are bracing for closure
of national parks, a possible delay
in social security and disability
checks, and no processing of new
paperwork for passports or
anything for that matter.
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

5. If the last five years are any guide
the issue will be resolved at the last
minute or before too many voters
get too angry. But the Forex
response to a United States
government shutdown could affect
the dollar forever.
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

6. For example, when foreigners buy
US treasury bonds they expect
those bonds to be backed by the
full faith and trust in the American
government.
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

7. What are the responses to bond
buying and the Forex response to a
United States government
shutdown when Uncle Sam no
longer pays his bills?
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

8. Bonds, Yields, and the USD
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

9. We noted recently that higher
bond yields drive the dollar higher.
Most recently this has had to do
with the Federal Reserve
quantitative easing stimulus
program and its expected
cessation.
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

10. If the prospect of a slight change in
yield causes a slight change in the
dollar versus other currencies,
what will happen when the
international bond market loses all
faith in US treasuries?
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

11. Chaos may be too mild a term for a
possible Forex response to a
United States government
shutdown. Eighty-five percent of
all Forex trades include the US
dollar.
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

12. Most minor currencies do not
trade one against the other. Rather
they trade against the US dollar. If
traders lose faith in the US dollar
will they use the Euro, Yen, or
another major currency?
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

13. Foreign Trade
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

14. The reason that Forex markets
exist is to facilitate foreign trade.
When an American company sells
machinery to a company in the
Europe it expects to be paid in US
dollars.
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

15. However, if the dollar is unstable
they may rewrite the contract to be
paid in Euros. How will those
doing business internationally deal
with a possible Forex response to a
United States government
shutdown?
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

16. What Are Your Options?
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

17. The Forex response to a United
States government shutdown could
be dramatic with the dollar losing
significant strength or the market
could simply assume that once
grandstanding on Capitol Hill is
over that things will revert to
normal.
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown

18. Trading currency options may be a good
approach to this sort of uncertainty. The
advantages of buying calls or puts on the
dollar are that losses are limited to the
price paid for the contract, the buyer can
exercise the contract any time within the
contract period should price changes
warrant, and he can simply sell his
contract for a profit and never really
engage in online currency trading.
By: http://www.theforexnittygritty.com/forex/forex-response-to-a-united-states-
government-shutdown