Be Careful, This Rally is Now Running Only on Fumes

The financial market has experienced one of its worst patches in over 70 years, as a housing crisis during 2007 led to a financial one, which then affected all economies from across the globe. While some are still comparing the current recession to previous ones, others are observing the market’s price movements, as 2009 has turned out to be an outstanding year for riskier assets, climbing to astonishing levels, only last seen prior to the economic downturn.

Stock indices have retraced to stable levels, while once known as “high yielding currencies”, have regained a fair portion of their 2008’s avalanche. The Aussie, for example, has jumped by over 50% since the start of 2009, as investors have taken advantage of the massive drop, seeking returns from high yielding assets.

By taking a glance at the chart below one can see that a sudden change in monetary actions, provided stability to high yielders at the start of the year. This was then followed by a massive rally as currencies such as the Aussie, yielding then a 2.5% rate, attracted cash that was sitting on the side lines.

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