Despite the well-defined and ongoing credit crisis, the financial contraction triggered by the Lehman collapse was sudden, severe, worldwide and went beyond expectations, despite being telegraphed in advance. The Bloomberg Financial Conditions Index shows how severe and significant the financial shock was as it registered a nearly 12 standard deviation move from its pre-Lehman bankruptcy level. The search for signs of recovery has preoccupied financial analysts, but for currency traders it is as simple as watching the dollar. The US dollar has been a "safe-haven" basket for capital because the rest of the world's financial conditions are worse. Expectations of recovery likely will be reflected first in the copper market and in such currencies as Aussie and Canadian dollars.
The search for recovery Abe Cofnas Futures; May 2009; 38, 5; Docstoc pg. 20 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
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