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Nov 2020

Forex Trading and Its Effect on National Monetary Policy

Currency trading is a multi-trading business that involves the buying and selling of different currencies. The trading is done both in the physical markets and over the internet and through Forex brokerage firms. This trading involves buying low and selling high and it is also known as the foreign exchange or currency trading market. There are many companies and individuals involved in currency trading around the world. International Trade Administration reports that in 2020, foreign direct investment (FDI) in the USA was approximately $481 billion, with most of this money coming from international markets such as Europe, Japan, and the United Kingdom. Other countries which contributed to this rise included South Africa, Australia, China and India.

As discussed above, currency trading is very important to those who are engaged in the financial market. However, many people fail to realize that the market does have a large impact on national monetary policy, especially when it comes to the US dollar. The reason why the US dollar is so strong compared to other currencies is due to the US's global economic and political status.

Many economists believe that the International Trade Administration's (ITA) statistics on international trade may be biased because they don't allow for certain countries' data to be freely available. According to these statistics, many international companies to increase their investments in the USA but do very poorly because of the stricter monetary policy of the US government. For instance, Japanese stocks have increased dramatically in recent years and this has been attributed to the increased demand for Japanese goods among the international market. But a similar pattern can also be observed in European stocks. In fact, the European Union's gross domestic product growth has been much slower than the US over the past few years.