How will Katrina affect the dollar?

There's one thing that bothers all forex traders around the world – how will hurricane Katrina affect the US dollar? At first the dollar moved as predicted – down, but as more accurate estimations of the financial damage appeared the dollar rebounded back. It seems that currently no one can predict how will this situation play it self out.

Forex trading is in its basis a speculation. The profit comes from fluctuations in the relations between different currencies. Though predicting how a certain currency will act is never easy or fail-proof, most traders do have some perspective on the possible outcomes in the market. Thus, this new situation is somehow disturbing. As one Chicago based broker said "I can put a good case for the dollar going up and a good case for the dollar going down". Most traders are now completely in the blind as different evaluations stream constantly from every direction.

From one point of view it seems that the huge economic expanses that Katrina caused will continue to push the dollar downwards, but there are many traders that claim that the strongest economy in the world deserves a little more credit. A new standpoint claims that though the damages are sever and should be taken into account, they are not nearly as sever as some traders think. Thus everyone agree that the dollar will suffer a certain recess but many do not agree on its degree. The only thing that we can do is continue to monitor this situation as it unfolds.

Article written by Paul Greenspan on september 7th, 2005. Editorial team.