During 2023 and 2024, the U.S. dollar flexed its muscles like never before, surging in strength driven by robust American economic growth of 2.5%, hawkish interest rate hikes by the Federal Reserve that took rates to a peak of 5.5%, and investors flocking to the safe-haven greenback amidst global uncertainties like the protracted Russia-Ukraine war and escalating US-China tensions.

This powerhouse dollar, which saw its value climb over 15% in 2022 against other major currencies as measured by the U.S. Dollar Index (DXY), sent shockwaves through currency and foreign exchange (forex) markets worldwide.

Currency upheaval

As the greenback soared, it exerted tremendous pressure on other currency values, causing major fluctuations in the forex trading arena – one of the largest and most liquid financial markets with $7.5 trillion traded daily.

Investors found it costlier to fund risky currency carry trades and bets, while central banks watched helplessly as their foreign currency reserves lost over an estimated $1.2 trillion in value due to the stronger dollar, prompting some to diversify into other reserve currencies.

Inflationary pressures

The strong dollar also had significant implications for inflation across the globe. With import prices for many countries becoming cheaper due to their currencies depreciating against the mighty dollar, this exerted downward pressure on domestic inflation rates.

However, for the United States itself, the robust dollar made imports more affordable for American consumers but also hurt exports by making U.S. goods pricier for international buyers.

This dichotomy posed a complex challenge for the Federal Reserve in its battle against stubbornly high inflation that reached around 5-6% in 2023-2024. While the strong dollar helped ease some inflationary pressures from imports, it also risked slowing U.S. economic growth by impacting exports and corporate profits.

Central banks worldwide had to carefully weigh these dynamics when formulating their monetary policies to tame inflation without tipping their economies into recessions.

Emerging market woes

Developing economies felt the dollar’s wrath most severely. Countries like Turkey saw its embattled lira plunge over 50% against the muscular greenback, while crisis-stricken Argentina, grappling with a staggering 211.4% inflation rate, saw its peso plummet drastically in value against the soaring dollar.

Nations shackled by hefty dollar-denominated debts, like Sri Lanka and Ghana, saw their repayment costs skyrocket by billions, exacerbating economic instability and heightening default risks. Currency volatility spiked, scaring away foreign investors and triggering destabilising bouts of capital flight from troubled nations like Pakistan and Peru.

Commodity currencies hammered

The ripple effects hit commodity exporters hard too. As the dollar surged, globally-traded commodities like oil, copper and gold became pricier for international buyers using weaker currencies, sharply denting demand.

Oil prices tumbled from over $90 to around $70 per barrel, copper fell 15%, while gold lost 10% of its value against the bullish dollar.

This battered the export revenues and economic growth of resource-rich economies like Canada, Australia, and Brazil, brutally weakening their commodity-linked currencies.

Currency trading tremors

The dollar’s dominance shook up the major currency pairs favoured by traders and multinationals alike. The euro lost a staggering 7% to the relentless greenback, the British pound sterling fell 11%, while Japan’s yen plunged over 16% against the muscular dollar.

American corporations like Walmart and Caterpillar exporting goods abroad found it tougher to compete on pricing, while foreign rivals like Toyota and Volkswagen gained an edge selling their products cheaper in the lucrative U.S. market.

Global firms had to urgently review pricing strategies and currency hedging tactics to shield profit margins from these wild swings. 

Currency war fears

Some nations fired back aggressive currency interventions to preserve their export competitiveness against the almighty dollar.

The Bank of Japan spent a whopping $60 billion propping up the yen – its biggest market intervention in over two decades.

Not to be outdone, the Swiss National Bank offloaded over $100 billion in a concerted effort to curb its franc’s sharp appreciation against the euro and dollar which threatened Swiss exports. China too weakened the yuan by around 8% to bolster its exporters.

But such dramatic moves stoked fears across markets of a destructive ‘currency war’ breaking out if countries continually devalued their currencies to gain an export edge.

What lies ahead?

Predicting the dollar’s trajectory going forward remains one of the hottest debates across financial capitals.

Some economists and analysts expect the greenback’s strength to gradually cool down as major global economies stabilise and other central banks like the European Central Bank follow the Fed in aggressively hiking rates to tame inflation.

However, others point to the dollar’s entrenched role as the world’s predominant reserve currency, now accounting for 59% of global foreign exchange reserves, coupled with America’s relatively robust economic performance and attractiveness of U.S. financial markets, as powerful structural factors bolstering the greenback’s prolonged dominance.

Uncertain factors like the path of persistent inflation hovering around 5-6% across developed nations, interest rate moves by central banks, festering trade tensions, shifts in global supply chains, commodity market shocks and geopolitical flare-ups will undoubtedly keep roiling and shaping currency values going forward.

Corporations with sprawling global operations, institutional investors with cross-border exposures and individual traders will need to stay exceptionally vigilant, buttressing themselves with robust currency risk management strategies, active hedging using derivatives like futures and options, and well-diversified portfolios to safely navigate this ever-shifting landscape.

In conclusion, the U.S. dollar’s awe-inspiring muscular performance during 2023-2024 triggered an upheaval across global currencies and frenzied forex trading arenas.

While the greenback’s prolonged heavyweight status remains hotly debated, its pre-eminent position as the world’s reserve currency coupled with America’s economic and financial market strength, ensures its movements will keep reshaping international trade flows, reorienting capital shifts and whipsawing exchange rates worldwide for the foreseeable future.

Constant preparedness through prudent currency hedging, rigorous risk mitigation and coordinated international policy efforts will prove vital to weather future dollar storms that shake the global financial order.

Dear Client,

Shares product NVIDIA is about to conduct a share split after the market closes on June 7, 2024. Starting from the market opening on June 10, 2024, NVIDIA expects to provide investor trading in divided contracts.

After the share split, please be aware of the following:

1. The trading volume of NVIDIA open positions will become 10 times the original lot size.

2. The “opening price” and “take-profit/stop-loss setting price” of NVIDIA’s positions will become 1/10 of the original price.

3. NVIDIA’s price at the opening of the market on June 10 is expected to be approximately 1/10 of the closing price on June 7.

4. After the market closes on June 7, all NVIDIA pending orders in real accounts will be cancelled.

5. After the market closes on June 7, all NVIDIA orders in the demo account will be cancelled, including open positions and pending orders.

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

New contracts will automatically be rolled over as follows:

Please note:

• The rollover will be automatic, and any existing open positions will remain open.

• Positions that are open on the expiration date will be adjusted via a rollover charge or credit to reflect the price difference between the expiring and new contracts.

• To avoid CFD rollovers, clients can choose to close any open CFD positions prior to the expiration date.

• Please ensure that all take-profit and stop-loss settings are adjusted before the rollover occurs.

• All internal transfers for accounts under the same name will be prohibited during the first and last 30 minutes of the trading hours on the rollover dates.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Famous for his principles in value investing, mainstream media regard Warren Buffett as one of the most successful investors of all time. Buffett runs Berkshire Hathaway (Symbol: BRKB), one of the favourite stocks for many investors in the world. 

But there is an alternative school of thought challenging that Warren Buffett’s principles are “old school, obsolete, unrealistic and unsexy”. 

Buffett’s principles and his lifestyle 

Keywords of value investing principles are “long-term”, “patience” and “value”. Very much slow and steady. And people tend to forget that Buffett started investing when he was 10 years old, and he has since then been consistent until today. With an average ROI of 22% per year and compounding power, it is easy to see why Buffett ends up being one of the wealthiest people on the planet. 

Realistically though, how many people start investing at the age of 10? Probably no one else apart from Buffett himself. 

Modern day lifestyle, inflation and debt  

Consider an alternative scenario where Buffett only starts investing when he was 30, whereby he would have been drowned with student debts from pursuing a master’s degree or PhD. With a regular job, he is only left with some USD500 a month after deducting the necessities. At the same ROI of 22% per year, he would end up with 99.9% less even after a period of 30 years.  

There is just no way Buffett would be labelled as “the most successful investor”, even if he had been disciplined in his investment journey based on this alternative scenario. 

The truth is that most people belong to this alternative scenario rather than being born as an investment prodigy who would start at the age of 10.  

Add inflation into the picture and the ROI would be eroded to somewhere between 15-18% per year. Growing your wealth with a small capital and at such a speed is just not enough to keep up and live a decently happy life, much less to achieve financial freedom or becoming rich. 

Value investing with little money down does not make any sense 

Once again, consider yourself as an individual in the alternative scenario mentioned earlier. With just USD 500 spare cash a month and a long-only strategy, it is not easy to salvage a bad entry point, especially if you entered at the highest point of the market. It is also mentally painful if you decide to practice dollar cost averaging (DCA) when the market is crashing, as the more cash you invest, the more your portfolio will be bleeding. Sometimes it takes half a decade for the investment to break even. And the investor would already lose out to inflation too. For nothing. 

What a pain. 

An average joe with just USD 500 spare cash a month also must diversify. Playing the all-in strategy means you go big or go home. Buffett can do concentrated positions because he has the holding power, but truth is most people do not have such holding power. Choices are needed in certain occasions, and if one asset class is down, people do need another asset class to cover back the losses. And that is just how reality works. 

A lot of flexibility is what helps the average individuals 

This is where CFD trading becomes very appealing to many. Flexible, small and quick – just like a ninja.  

Make money no matter the market is bullish or bearish 

In CFDs, you can choose to bet if the market is going upwards or downwards. If the market is crashing, you can simply choose to follow the trend and short the market, making money when everyone else is bleeding.  

Fast in fast out equals healthy cashflow 

Most CFD traders practice intraday trading, and positions would be closed quickly to avoid overnight risks. Such practice also allows for healthy cashflow for a regular person. There would be no necessity to have your USD 500 cash stuck for extended periods of time.  

Lower barrier to entry with leverage 

With leverage of up to 500:1, CFDs also offer a lower barrier to entry – you only need to put up a small sum to gain full market exposure. 

With a starting amount of USD 500 and leverage of 500:1, you can open positions of up to USD250,000, which can potentially amplify your profits. With Warren Buffett’s methods, you will have to earn the spare cash of USD250,000 first, which is not really viable to many. 

Diversification of markets you can expose yourself to 

You can gain exposure to forex, commodities, bonds, shares, indices and ETFs via CFD trading. It is easy to hedge or diversify with CFDs. 

So, is Warren Buffett lying? 

Perhaps from his own perspective, Buffett is not lying per se. But his methods are unrealistic and cumbersome for anyone without USD 1,000,000 in cash lying around waiting to be invested.

Once a while, everyone would want a cup of latte or boba tea, travel to another country, celebrate little moments in life, and just live simple happiness. Life could feel meaningless if every single penny saved must be invested and had to be locked for at least half a decade. 

Start CFD trading with VT Markets 

With 1000+ assets being offered in the form of CFD trading, there is nothing to stop you from living the lifestyle you desire. Start your financial trading journey today! 

Open a live account 

Dear Client,

Please note that the dividends of the following products will be adjusted accordingly. Index dividends will be executed separately through a balance statement directly to your trading account, and the comment will be in the following format “Div & Product Name & Net Volume ”.

Please refer to the table below for more details:

The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

As part of our commitment to provide the most reliable service to our clients, there will be server maintenance this weekend.

Maintenance Hours :
1st of June 2024 (Saturday) 02:00 – 03:00 (GMT+3)

Please refer to the MT4/MT5 software for the specific maintenance completion and marketing opening time.

Please note that the following aspects might be affected during the maintenance:

1. The price quote and trading management will be temporarily disabled during the maintenance. You will not be able to open new positions, close open positions, or make any adjustments to the trades.

2. There might be a gap between the original price and the price after maintenance. The gaps between Pending Orders, Stop Loss and Take Profit will be filled at the market price once the maintenance is completed. It is suggested that you manage the account properly.

Thank you for your patience and understanding about this important initiative.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Dear Client,

Affected by international holidays, the trading hours of some VT Markets products will be adjusted. Please check the following link for the affected products:

Notification of Trading Adjustment in Holiday

Note: The dash sign (-) indicates normal trading hours.

Friendly Reminder:
The above data is for reference only, please refer to the MT4/MT5 software for specific data.

If you’d like more information, please don’t hesitate to contact info@vtmarkets.com.

Interest rates, interest rates. This seems to be everything everyone with any skin in today’s financial market ever cares about. With the whole world shifting uncomfortably in their seat whenever a rate hike review is due from the Federal Reserve, this almost obsessive focus on this seemingly arbitrary number feels a little crazy for the uninitiated.

After all, what can one little percentage point really do?

The concept of interest rates dates back to ancient Mesopotamia around 3,000 BC, where loans were made and interest was charged in the form of a commodity, like grain or silver. However, it was the ancient Greek philosopher Aristotle who first noted the idea of interest, albeit with skepticism, considering it unnatural.

Fast forward to the Renaissance, when financial minds like the Italian mathematician Leonardo Fibonacci began to formalise the mathematics behind interest rates, setting the stage for modern economic theories. We still use the Fibonacci retracement as a technical analysis tool today.

In the modern economy, interest rates are treated as the “cost” of borrowing money. They influence consumer spending, business investments, and overall economic growth. The power of interest rates lies in their ability to steer the economy. Whether it’s cooling down an overheating market or stimulating a sluggish one, this little number wields immense influence.

So how profound is the influence of interest rates on the value of any currency? We can observe how interest rates fluctuate, almost in tandem to market movement. Why then, one might wonder, is it necessary for central banks review interest rates periodically?

And why should you as a forex trader care? 

The role of central banks in managing the economy 

Central banks change interest rates primarily to manage economic stability. Changes in interest rates can determine if the economy growth of a country is sustainable, as this in turns control inflation and achieves a stable financial environment.  

In the context of monetary policy, central banks can have varying attitudes in approaching inflation and economic growth. When describing the tone and content of speeches by central bank, two terms are commonly used: 

Being hawkish cools down the economy

Hawkish policymakers prioritise keeping inflation low, often advocating for higher interest rates and tighter monetary policy.

Their main concern is that high inflation could destabilise the economy, so they tend to act quickly and decisively to raise rates or otherwise restrict the supply of money. 

Being dovish heats up the economy 

Dovish policymakers are more concerned with unemployment and supporting economic growth. It is common to see lower interest rates and a looser monetary policy to stimulate borrowing and spending.

Dovish policymakers are more willing to accept higher inflation if it means encouraging job creation and economic growth. 

When hawkish and when dovish? 

To put it simply, a sensible central bank may start taking a hawkish stance when it perceives that the economy is overheating. Common signs that an economy is overheating would include rising inflation and asset price bubbles. As raising interest rates can make borrowing more expensive, a hawkish stance can potentially cool off speculative investments and reducing the risk of a market bubble. 

On the other hand, central banks tend to adopt a dovish stance when it felt the need to stimulate the economy. Recession periods, high unemployment rates and financial crises are the usual triggers. For instance, during the COVID-19 pandemic in 2020, central banks like the US Federal Reserve and the European Central Bank (ECB) slashed interest rates to near-zero levels and implementing quantitative easing to support their economies. 

A game of tug-of-war 

Whichever stance taken by a central bank, change is the only constant in any economy. This is the reason why central banks cannot go with a one-way street approach as it pleases, but rather review its approach periodically to tighten and loosen the monetary policy like a game of tug-of-war depending on the economy status at the given material time. 

Can interest rate solve all economic problems? 

It depends. While interest rates are key drivers in forex markets, the impact isn’t always straightforward. Delays in economic response, high existing debt and global economic conditions can lessen the effectiveness of rate changes.

Also, when rates are near zero, traditional rate cuts become less effective. Interest rates are also closely tied to other economic indicators like employment rates, inflation and GDP growth.  

As such, understanding how interest rates relate to these factors can provide deeper insights into potential currency movements. For forex traders, understanding and anticipating interest rate changes is essential for those who would like to trade on news, which can be very swift and lucrative. 

Trading opportunities arising from changing interest rates 

Interest rates are closely tied to other economic indicators like employment rates, inflation and GDP growth. Understanding how interest rates relate to these factors can provide deeper insights into potential currency movements.

Further, announcements regarding interest rate changes are typically times of high volatility in forex markets, quite like the nature of news trading. Traders can capitalise on this volatility if they can predict the direction of the market movement following an interest rate change. 

What if the central bank makes a poor decision? 

In short, it can turn into a situation of adding oil to fire. Not only there would be long-term economic challenges for the country, but everything from the stability of the currency to general living standards would be impacted. 

One of the classic examples would be Turkey and one of the biggest losers in the currency market, the Turkish Lira (TRY).  

Under the administration of President Recep Tayyip Erdoğan’s, the Central Bank of the Republic of Turkey (CBRT) has lowered interest rates despite soaring inflation. President Erdoğan has publicly advocated for lower interest rates, arguing that it helps to foster economic growth. 

The Turkish lira (TRY) has seen a sharp fall since 2018, depreciating between 80% to 90% against major currencies such as the US Dollar (USD), the Euros (EUR), Pound Sterling (GBP) and Japanese Yen (JPY). Foreign investors are spooked, and the purchasing power of Turkish people practically just evaporated into thin air.  

Opportunities for forex traders  

With an obvious trend from the CRBT, USDTRY and EURTRY are the most traded exotic currency pairs as traders can simply choose to short TRY.

Combined with the right trading strategy, technical analysis and risk management, both pairs can present a good trade setup for traders to seize some profits. 

Open a live account