With the weakening of financial markets in South America and Asia, and the world facing the threat of a US war with Iraq, the direction of the global foreign exchange markets have a certain amount of uncertainty attached. Countries may have to lay a greater emphasis on improving their monetary environment, in order to reduce the downside risks. This will allow them to have a greater access to the global capital thus leading to growth. How volatile will the currency markets be? Is there a need for investor caution?

Intense discernment and caution will characterize the global foreign exchange markets in 2003, a period that could be decisive in determining if the global economies will consolidate the economic recovery—even if modest—accomplished in 2002. The recovery in 2002 was unlike other recessions that are followed by routine and automatic recovery. The global recovery since late 2001 and through 2002 was engineered with determination. Households played a non-trivial part in holding consumer confidence high. Governments and monetary authorities worked in tandem to sustain consumer confidence and to reboot demand.

But questions about the pace and sustainability of the recovery remain, and have become more pronounced and, perhaps, critical in the last quarter of 2002. There are new risks to the global economy. Financial markets have deteriorated in South America and parts of Africa and Asia. Japan has yet to shake off its helplessness. Europe—especially the euro area— is unsure about its recent gains. It has yet to convince itself that the marked improvement in the monetary and macroeconomic environment can be preserved.

Global Foreign Exchange Markets in 2003: Intense Caution and Discernment, Foreign Exchange, Markets, Global, Caution,Forex, financial markets, monetary environment, currency markets, monetary authorities, macroeconomic environment, marked improvement, South America, global economy, sustainability, consumer confidence, economic recovery, Intense discernment.