Venezuela World’s Newest Forex Market; Euro Remains Under Pressure

by Marco Lavanna

In an effort to stop the spiraling depreciation of the bolivar, Venezuela has launched their own regulated forex market. The bolivar’s rapid downward race has been driving inflation rates up faster than a rocket, hitting an inflationary rate of 31% last month. President Hugo Chavez and the socialist regime of Venezuela introduced the new foreign exchange market hoping to counter this rapid devaluation of their national currency.

The Venezuelan government already had several things in place designed to control the currency, including two fixed rates, and a legal loophole allowed for foreign exchange with bond trading. The new regulations close this loophole and put the market firmly under the control and oversight of the central bank.

According to the central bank, a large part of the bolivar’s depreciation was due to rampant speculation in the old system, to the tune of about $30 billion. They say the new forex market will only deal with $5-6 billion with the stringent regulations now in place. Others say the bolivar drop was more due to the OPEC member’s reduced oil revenues.

In other forex markets, the euro continued to cause traders some anxiety as the continuing instability in the European markets has left investors wary. Comments from Dai Xianglong, chairman of China’s National Social Security Fund, helped the euro hold fairly steady and contributed to a flurry of trading in the Australian exchange with the news of increased exporting to China.

After the Federal Reserve’s Beige Book survey showed tame growth for the US, the dollar fell versus the yen. The Swedish krona and Brazil’s real both made gains versus the dollar, as well.

Forex trading is the now common term that simply means trading currencies. While a small portion of the $3 trillion dollars traded daily is the result of government or companies actual currency conversion needs, the majority of the trading is done on speculative basis. A forex trader will buy one currency while selling another, each time in the hopes that the value of the currency being bought will go up.

Trading in the forex markets is not for the faint of heart as the speed of changes can be moment to moment, however, experienced traders can earn very healthy incomes when they know what they are doing. The key is to learn about how the markets work and how to be able to gauge with an accuracy what will happen with particular currencies. To learn more about forex, visit websites dedicated to the markets such as