The foreign exchange market, or forex, is the largest financial market in the world. With a daily trading volume of over $6 trillion, it is also one of the most volatile markets. Currency prices can fluctuate rapidly, making it difficult for traders to predict market movements and make profitable trades.
One of the most significant drops in forex history occurred during the global financial crisis of 2008. From July to September of that year, the US dollar index, which measures the value of the US dollar against a basket of other currencies, experienced its biggest 90-day drop in history.
The US dollar index is a weighted average of the value of the US dollar relative to the euro, Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. It is used as a benchmark to measure the strength or weakness of the US dollar in relation to other major currencies.
During the 90-day period from July to September 2008, the US dollar index fell by 11.5%. This was a significant drop, as the index had been relatively stable in the months leading up to the financial crisis. The drop in the US dollar index was largely driven by a number of factors, including the subprime mortgage crisis, the collapse of Lehman Brothers, and the subsequent global economic downturn.
The subprime mortgage crisis was a major contributing factor to the drop in the US dollar index. In the years leading up to the crisis, banks had been lending large sums of money to subprime borrowers, many of whom were unable to repay their loans. As a result, many banks were left with significant losses. This led to a loss of confidence in the banking system, which in turn led to a drop in the value of the US dollar.
The collapse of Lehman Brothers was another significant factor in the drop in the US dollar index. Lehman Brothers was one of the largest investment banks in the world, and its collapse in September 2008 sent shockwaves through the financial markets. Many investors lost confidence in the global financial system, which led to a flight to safety. Investors began selling their US dollar-denominated assets and buying safer assets such as gold and the Swiss franc. This further weakened the US dollar and contributed to its 90-day drop.
The global economic downturn that followed the financial crisis also played a role in the drop in the US dollar index. As the global economy faltered, many central banks around the world began to lower interest rates in an attempt to stimulate economic growth. This made the US dollar less attractive to investors, as the interest rates in other countries were relatively higher.
In conclusion, the biggest 90-day drop in forex history occurred during the global financial crisis of 2008. The drop in the US dollar index was largely driven by the subprime mortgage crisis, the collapse of Lehman Brothers, and the subsequent global economic downturn. This event serves as a reminder of the volatility of the forex market and the importance of keeping abreast of global economic events when trading currencies.
