How Do Banking Reforms Affect The Dollar?

It has been another active day in the financial markets with the Dow Jones Industrial Average plunging more than 200 points and the dollar moving in vastly different directions against the euro, Japanese Yen and British pound. Despite the lack of consistency in the dollar’s performance, there is one overarching theme in the forex markets today, which is risk aversion. All of the higher yielding currencies have plunged and the only reason why the euro did not participate in the move is because it has already become grossly oversold. Politics have dominated the headlines all week and unfortunately politics can shape economics which is why the dollar had such a sharp reaction to the Republican win in Massachusetts Tuesday night and today’s proposals for banking regulations from President Obama.