Swiss Franc Strengthens to Parity With Dollar on Recovery Signs

The Swiss franc strengthened to parity with the dollar for the first time in 19 months on
speculation the economic recovery is gathering pace.

The franc also rose to the highest level in a week against the euro after Swiss National Bank President Jean-Pierre Roth said yesterday that central banks may “soon” start withdrawing unconventional measures as the global economy gains strength.

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Russia to Buy Canadian Dollars, Considers Other Currencies

Russia’s central bank plans to add Canadian dollars to its reserves and may include other
currencies as it seeks to lessen its dependence on the greenback.

“Technical preparations for transactions in Canadian dollars are underway,” a Bank Rossii
official said by phone in Moscow, declining to be identified in line with the regulator’s
policy. “Then there may be

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Australian Dollar, Metals Rise on Growth Outlook; Stocks Gain

The Australian dollar rose and commodities gained on evidence economies are rebounding from the first global recession since World War II. Stocks and U.S. index futures advanced, while returns on emerging-market bonds climbed to the highest level in at least 16 years.

Australia’s currency strengthened 1 percent against the dollar at 8:50 a.m. in New York and the Dollar Index fell 0.8 percent. The MSCI World Index of 23 developed markets added 0.8percent. Standard & Poor’s 500 Index futures rose 0.6 percent.Gold rallied 1.2 percent to a record $1,182.95 an ounce in
London, and lead paced gains in industrial metals.

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Canada’s Dollar Climbs on Russian Central Bank Endorsement, Oil

Canada’s dollar appreciated to the highest in a week after Russia’s central bank said it will add the currency to its reserves, and as crude oil and stock-index futures rose.

Canada’s dollar, nicknamed the loonie, advanced against all but two of its 16 most-traded counterparts, South Africa’s rand and Australia’s dollar. The U.S. dollar was the worst performing so-called major currency.

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US Dollar Falling: Is this the Beginning of Downtrend?

US Dollar : A short term Forecast

The US Dollar is experiencing tremendous pressure due to higher interest rates expected in next year in Europe & US.

The rate of savings in US is going to be high due to the effect of recession. Although the world economies are experiencing recovery the spending habits are influenced by the aftereffect of the recession & due to people expecting the interest rates to rise in future.

Recently the Royal Bank of Australia took a decision to increase the interest rates. This decision will have an effect on world economy as the high interest rates would result in inflation- higher prices.

In US although Housing sector is growing commercial real estate industry is falling at full speed. Personal credit is declining at a rate of 4 % year to year basis due to stringent credit standards.

On the contrary the US firms are growing & new orders are increasing. The employment is not growing at the same rate but is expected to grow over a short period as Companies would again start recruiting.

The recent decline of US Dollar against major currencies (especially Canadian & Australian Dollar) could be a beginning of downfall which could last till the end of December.

Dollar Reaches Breaking Point as Banks Shift Reserves

 
Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and
yen, further pressuring the greenback after its biggest two-quarter rout in almost two decades.Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg.Nations reporting currency breakdowns put 63 percent of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.

World leaders are acting on threats to dump the dollar while the Obama administration shows a willingness to
tolerate a weaker currency in an effort to boost exports and the economy as long as it doesn’t drive away the
nation’s creditors. The diversification signals that the currency won’t rebound anytime soon after losing 10.3
percent on a trade-weighted basis the past six months, the biggest drop since 1991.

“Global central banks are getting more serious about diversification, whereas in the past they used to just talk
about it,” said Steven Englander, a former Federal Reserve researcher who is now the chief U.S. currency strategist at Barclays in New York. “It looks like they are really backing away from the dollar.”

                         Sliding Share

The dollar’s 37 percent share of new reserves fell from about a 63 percent average since 1999. Englander concluded in a report that the trend “accelerated” in the third quarter. He said in an interview that “for the next couple of  months, the forces are still in place” for continued diversification.America’s currency has been under siege as the Treasury sells a record amount of debt to finance a budget deficit that totaled $1.4 trillion in fiscal 2009 ended Sept. 30.

Intercontinental Exchange Inc.’s Dollar Index, which tracks the currency’s performance against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, fell to 75.77 last week, the lowest level since August 2008 and down  from the high this year of 89.624 on March 4. The index, at 76.104 today,is within six points of its record low reached in March 2008. Foreign companies and officials are starting to say their economies are getting hurt because of the dollar’s weakness.

                        Toyota’s ‘Pain’

Yukitoshi Funo, executive vice president of Toyota City, Japan-based Toyota Motor Corp., the nation’s biggest automaker, called the yen’s strength “painful.” Fabrice Bregier, chief operating officer of Toulouse, France-based Airbus SAS, the world’s largest commercial planemaker, said on Oct. 8 the euro’s 11 percent rise since April was “challenging.”

The economies of both Japan and Europe depend on exports that get more expensive whenever the greenback slumps.

European Central Bank President Jean-Claude Trichet said in Venice on Oct. 8 that U.S. policy makers’ preference for a strong dollar is “extremely important in the present circumstances.”

“Major reserve-currency issuing countries should take into account and balance the implications of their monetary policies for both their own economies and the world economy with a view to upholding stability of international financial markets,” China President Hu Jintao told the Group of 20 leaders in Pittsburgh on Sept. 25, according to an English translation of his prepared remarks. China is America’s largest creditor.

                       Dollar’s Weighting

Developing countries have likely sold about $30 billion for euros, yen and other currencies each month since March,according to strategists at Bank of America-Merrill Lynch.That helped reduce the dollar’s weight at central banks that report currency holdings to 62.8 percent as of June 30, the lowest on record, the latest International Monetary Fund data show. The quarter’s 2.2 percentage point decline was the biggest since falling 2.5 percentage points to 69.1 percent in the period ended June 30, 2002.

“The diversification out of the dollar will accelerate,” said Fabrizio Fiorini, a money manager who helps oversee $12 billion at Aletti Gestielle SGR SpA in Milan. “People are buying the euro not because they want that currency, but because they want to get rid of the dollar. In the long run, the U.S. will not be the same powerful country that it once was.”

Central banks’ moves away from the dollar are a temporary trend that will reverse once the Fed starts raising
interest rates from near zero, according to Christoph Kind, who helps manage $20 billion as head of asset allocation at Frankfurt Trust in Germany.

                     ‘Flush’ With Dollars

"The world is currently flush with the U.S. dollar, which is available at no cost,” Kind said. “If there’s a
turnaround in U.S. monetary policy, there will be a change of perception about the dollar as a reserve currency. The diversification has more to do with reduction of concentration risks rather than a dim view of the U.S. or its currency.”

The median forecast in a Bloomberg survey of 54 economists is for the Fed to lift its target rate for overnight
loans between banks to 1.25 percent by the end of 2010. The European Central Bank will boost its benchmark a half percentage point to 1.5 percent, a separate poll shows.

America’s economy will grow 2.4 percent in 2010, compared with 0.95 percent in the euro-zone, and 1 percent in Japan, median predictions show. Japan is seen keeping its rate at 0.1 percent through 2010.Central bank diversification is helping push the relative worth of the euro and the yen above what differences in interest rates, cost of living and other data indicate they should be.The euro is 16 percent more expensive than its fair value of $1.22, according to economic models used by Credit Suisse Group AG. Morgan Stanley says the yen is 10 percent overvalued.

                       Reminders of 1995

Sentiment toward the dollar reminds John Taylor, chairman of New York-based FX Concepts Inc., the world’s largest  currency hedge fund, of the mid-1990s. That’s when the greenback tumbled to a post-World War II low of 79.75 against the yen on April 19, 1995, on concern that the Fed wasn’t raising rates fast enough to contain inflation. Like now, speculation about central bank diversification and the demise of the dollar’s primacy rose.The currency then gained 26 percent versus the yen and 25 percent against the deutsche mark in the following two years as technology innovation increased U.S. productivity and attracted foreign capital.“People didn’t like the dollar in 1995,” said Taylor, whose firm has $9 billion under management. “That was very stupid and turned out to be wrong. Now, we are getting to the point that people’s attitude toward the dollar becomes ridiculously negative.” 

                     Dollar Forecasts

The median estimate of more than 40 economists and strategists is for the dollar to end the year little changed at $1.47 per euro, and appreciate to 92 yen, from 89.97 today. Englander at London-based Barclays, the world’s third- largest foreign-exchange trader, predicts the U.S. currency will weaken 3.3 percent against the euro to $1.52 in three months. He advised in March, when the dollar peaked this year, to sell the currency. Standard Chartered, the most accurate dollar-euro forecaster in Bloomberg surveys for the six quarters that ended June 30, sees the greenback declining to $1.55 by year-end.

The dollar’s reduced share of new reserves is also a reflection of U.S. assets’ lagging performance as the country struggles to recover from the worst recession since World War II.

                         Lagging Behind

Since Jan. 1, 61 of 82 country equity indexes tracked by Bloomberg have outperformed the Standard & Poor’s 500 Index of U.S. stocks, which has gained 18.6 percent. That compares with 70.6 percent for Brazil’s Bovespa Stock Index and 49.4 percent for Hong Kong’s Hang Seng Index.

Treasuries have lost 2.4 percent, after reinvested interest, versus a return of 27.4 percent in emerging economies’ dollar- denominated bonds, Merrill Lynch & Co. indexes show.The growth of global reserves is accelerating, with Taiwan’s and South Korea’s, the fifth- and sixth-largest in the world, rising 2.1 percent to $332.2 billion and 3.6 percent to $254.3 billion in September, the fastest since May. The four biggest pools of reserves are held by China, Japan, Russia and India.

China, which controlled $2.1 trillion in foreign reserves as of June 30 and owns $800 billion of U.S. debt, is among the countries that don’t report allocations.“Unless you think China does things significantly differently from others,” the anti-dollar trend is unmistakable, Englander said.

                       Follow the Money

Englander’s conclusions are based on IMF data from central banks that report their currency allocations, which account for 63 percent of total global reserves. Barclays adjusted the IMF data for changes in exchange rates after the reserves were amassed to get an accurate snapshot of allocations at the time
they were acquired.

Investors can make money by following central banks’ moves, according to Barclays, which created a trading model that flashes signals to buy or sell the dollar based on global reserve shifts and other variables. Each trade triggered by the system has average returns of more than 1 percent.

Bill Gross, who runs the $186 billion Pimco Total Return Fund, the world’s largest bond fund, said in June that dollar investors should diversify before central banks do the same on concern that the U.S.’s budget deficit will deepen.

 “The world is changing, and the dollar is losing its status,” said Aletti Gestielle’s Fiorini. “If you have a 5-
year or 10-year view about the dollar, it should be for a weaker currency.”

(Forex News by Bloomberg)

US Dollar Falls as Stocks Gain on U.S. Banks, Spurring Risk Demand

The dollar declined against the euro as stocks rose after Goldman Sachs Group Inc. raised its view on large banks, encouraging investors to buy higher-yielding assets at the expense of the U.S. currency.

The greenback earlier weakened after the Group of Seven finance officials refrained over the weekend from calling for measures to bolster the world’s main reserve currency. The yen pared gains against the dollar after Japanese Finance Minister Hirohisa Fujii said the government will intervene if the yen moves in a “biased” direction.

The dollar slid 0.3 percent to $1.4614 per euro at 10:12 a.m. in New York, from $1.4576 on Oct. 2. It fell to a one-year low of $1.4844 on Sept. 23. The yen depreciated 0.1 percent to 131.05 per euro, from 130.90, and gained 0.2 percent to 89.67 per dollar, compared with 89.81 at the end of last week, after earlier advancing as much as 0.6 percent.

U.K. Pound (GBP) Drops Amid Speculation Economic Recovery May Stall

The pound fell for a second day against the euro as U.K. banking stocks declined earlier amid concern that the economic recovery may stall.The British currency was little changed against the dollar as the FTSE 350 Banks Index fell as much as 0.4 percent, before erasing its declines. A report this week may show U.K. house price growth slowed last month, according to a Bloomberg survey of economists. Futures traders increased bets that the pound will decline against the U.S. currency, the latest figures from the ashington-based Commodity Futures Trading Commission show.“There seems to be a growing belief that stocks have rallied too far given the outlook for earnings, and sterling does correlate well with stock markets,” said Neil Jones, head of European hedge-fund sales in London at Mizuho Corporate Bank Ltd. “The economic recovery is still fragile.”

Sterling weakened by 0.3 percent to 91.67 pence per euro as of 3:13 p.m. in London. It traded at $1.5939, from $1.5946. The pound bought 142.93  Japanese yen, from 143.21.
 

Government bonds gained, with the yield on the 10-year gilt dropping 3 basis points to 3.41 percent. The 4.5 percent security due March 2019 rose 0.26, or 2.6 pounds per 1,000- pound ($1,594) face amount, to 108.74. The two-year note yield declined less than 1 basis point to 0.75 percent. The U.K. banks’ index dropped 0.3 percent, pushing its loss since Sept. 29 to 5.6 percent. It has more than doubled in value since reaching its lowest level this year on March 9.

                      ‘Too Soon, too Fast’

Markets “have gone up too much, too soon, too fast,” New York University Professor Nouriel Roubini, who predicted the financial crisis, said in an interview in Istanbul on Oct. 3.
 

“I see the risk of a correction, especially when the markets now realize that the recovery is not rapid and V-shaped, but more like U- shaped.” The difference in the number of wagers by hedge funds and other large speculators on a decline in the pound compared with those on a gain, so-called net shorts, was 47,826 on Sep. 29, compared with net shorts of 31,595 a week earlier, CFTC data showed.

Losses by the pound may be limited as reports signal the economy is emerging from the recession after the Bank of England cut the benchmark interest rate to a record low and started buying government bonds to further depress borrowing costs.

                       Services Resilience

An index of services industries, based on a survey of 700 companies, increased to a two-year high in September of 55.3, from 54.1 a month before, Markit Economics said today. The median forecast in a Bloomberg survey of 28 economists was for a gain to 54.5. Financial firms see signs of recovery and banks report feeling “more confident” for the first time since the economic crisis began, according to a survey by the Confederation of British Industry and consulting firm Pricewaterhouse Coopers LLP.

In the U.S., the Institute for Supply Management’s index of non-manufacturing businesses, which make up almost 90 percent of the economy, rose to 50.9 in September, higher than forecast,the first expansion in a year, according to the Tempe, Arizona- based group. Fifty is the dividing line between expansion and contraction.

“The resilience of the services sector is buoying up sentiment and helping the pound,” said Jeremy Stretch, a senior currency strategist at Rabobank International in London. “There is some cautious optimism.”
(source: Bloomberg news)

Swiss Franc May Rise to 1.0015, Soc Gen Says: Forex Technical Analysis

Oct. 5 2009  -- The Swiss franc may climb 3 percent against the dollar should it close at less than 1.0325 today,
according to Societe Generale SA, citing technical indicators.

The currency may strengthen “medium term” to the July 2008 high of 1.0015 per dollar should it first appreciate
through so-called resistance levels of 1.0280 and then 1.0185, the September 2009 high, strategists including Hugues Naka and
Fabien Manac’h wrote today in a report, citing Fibonacci charts.Resistance is a level where sell orders may be clustered.

“This is a short-term bearish signal” for the dollar, the analysts said. The dollar-franc rate “should then extend its
medium-term downtrend” to the July 2008 low of 1.0015.The franc was little changed at 1.0341 per dollar, from
1.0350 francs at the end of last week.

The currency gained 3.3 percent against the dollar this year even after the Swiss National Bank began selling the franc
on March 12 to keep it from strengthening, primarily against the euro. It fell 1.1 percent versus the common European currency in
the period.

SNB Governing Board member Thomas Jordan said on Sept. 25 that policy makers will act “with full force” to avoid an
appreciation of the franc against the euro.

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a
security, commodity, currency or index. Fibonacci charts are based on the theory that securities tend to rise or fall by
specific percentages after reaching a new high or low.

Asian Currencies Gain This Quarter, Led by Won, on Recovery

Sept. 30,2009  -- Asian currencies strengthened this quarter, led by South Korea’s won, as signs economies are recovering from a slump spurred demand for regional assets.The Bloomberg JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies excluding the yen, today capped its best month since March, after Japan reported a sixth straight increase in industrial output. The won rose after a central bank survey showed manufacturers’ confidence reached a two-year high and the Taiwan dollar advanced on a report the island’s trade surplus will double this year.

“The fundamentals look pretty positive for Korea,” said Gerrard Katz, head of currency trading at Standard Chartered Plc in Hong Kong. “The economy is rebounding quite strongly, so the central bank’s a little more relaxed about won strength.”
The won gained 0.7 percent to 1,178.05 per dollar as of the 3 p.m. close in Seoul, according to data compiled by Bloomberg. It’s strengthened 6 percent this month, the best performance among Asia’s 10 most-traded currencies. Taiwan’s dollar advanced 0.5 percent to NT$32.20 after central bank Governor Perng Fai- nan told lawmakers in Taipei today that foreign inflows are putting “appreciation pressure” on the local currency. Shares in South Korea and Taiwan each attracted more than $4 billion from overseas this month alone, taking net purchases for the year to $19.4 billion and $11.4 billion as of yesterday. The Kospi stock index climbed 5.1 percent this month and the Taiex index jumped 10 percent.

Yield Gap

Relatively high yields also helped draw funds to the region. Bank Indonesia on Sept. 3 refrained from cutting its benchmark interest rate for the first time in 10 months, keeping it at 6.5 percent. The Philippine central bank will tomorrow keep its key rate at 4 percent, according to all 15 economists in a Bloomberg survey. Borrowing costs in the U.S. and Japan are no higher than 0.25 percent. The Asia Dollar Index rose 1.8 percent this month, taking its quarterly gain to 2.1 percent. The yen strengthened to 89.48 per dollar from 90.09 late yesterday in New York, headed for a 4 percent monthly advance.

Japan’s factory output rose 1.8 percent last month after climbing 2.1 percent in July, the Trade Ministry said today in Tokyo. Economists surveyed by Bloomberg News forecast a 1.8 percent increase. Chinese production expanded for a sixth month in September, a purchasing managers’ index released by HSBC Holdings Plc today showed.

‘Slow Rise’

 Taiwan’s dollar advanced 2.2 percent from the end of August, its biggest monthly gain since March. The Central Bank of the Republic of China (Taiwan) today reiterated that the exchange rate should reflect economic conditions and it will act to curb excessive volatility. Policy makers can try to influence exchange rates by buying or selling foreign currency.

“The central bank report points to a slow rise of the Taiwan dollar,” said Henry Lin, a currency trader at Shin Kong Commercial Bank in Taipei. Malaysia’s ringgit strengthened, completing a second
quarterly gain, after the central bank predicted the economy will return to growth by year-end as stimulus programs revive domestic demand. Gross domestic product slid 3.9 percent from a year earlier in the second quarter, following a 6.2 percent drop in the first three months of this year.

“The market is focusing on the better economic outlook,” said Azmi Shukri Rahman, a currency trader at CIMB Investment Bank Bhd. in Kuala Lumpur. “If merger and acquisition deals here are well received, we can expect to see more inflows supporting the ringgit.”

 The currency rose 0.7 percent to 3.4605 per dollar today, extending its quarterly advance to 1.5 percent.

Growth, Politics

Indonesia’s rupiah appreciated for a second quarter as the fastest economic growth in Southeast Asia and the re-election of President Susilo Bambang Yudhoyono helped draw funds from abroad.
The currency had its best month since April as the highest interest rates among Asia’s 10 largest economies lured investors. The central bank this week maintained its forecast for the economy to expand 4 percent this year, while the Asian Development Bank last week raised its growth projection to 4.3 percent from a March estimate of 3.6 percent.

“We’ve been very positive on the Indonesian rupiah due to the positive political and macroeconomic developments which led to quite a bit of re-rating on the currency,” said Mirza Baig, a currency strategist at Deutsche Bank AG in Singapore. “Carry trades were also popular and the rupiah’s high yield relative to the region makes it attractive.”

 The rupiah rose 0.7 percent to 9,660 in Jakarta, taking this quarter’s advance to 5.7 percent, according to data compiled by Bloomberg. The currency has risen 4.7 percent this month and its 13 percent gain for the year is Asia’s best performance.

Elsewhere, the Philippine peso climbed 1.6 percent this quarter to 47.365, while the Singapore dollar advanced 2.8 percent to S$1.4076. Thailand’s baht rose 1.9 percent to 33.43. China’s yuan was at 6.8263 versus 6.8307 at the end of June. 

(Source: Bloomberg)

Philippine Peso (PHP) to ‘Catch Up,’ Rise 3%, Standard Chartered Says

Sept.30,2009  -- The Philippine peso will gain 3 percent by the end of March as economic growth accelerates amid increased spending and because the central bank will refrain from raising interest rates, Standard Chartered Plc said.
 
The $167 billion Southeast Asian nation’s economy will expand 1.5 percent this year and 3.3 percent in 2010, the U.K. bank predicted in a research note today, raising previous forecasts of 0.7 percent and 2.7 percent. Rising remittances from 9 million Filipinos overseas and foreign investment in stocks will boost the external balance of payments surplus and support peso appreciation, according to Standard Chartered.

“The peso will outperform currencies of major trading partners like the U.S., Japan, Europe and China in the next three to six months,” Thomas Harr, a Singapore-based currency strategist at the bank, said in an interview.
 
Capital outflows that have restrained gains in the peso this year will return, Standard Chartered said, expecting the currency to “gradually catch up” with strength in other Asian exchange rates such as those of the South Korean won and Indonesian rupiah.

The currency, which traded at 47.395 per dollar as of 2:10 p.m. in Manila, will climb 0.8 percent to 47 by year-end and rise to 46 by March 31, Standard Chartered forecast. The peso appreciated 1.6 percent this quarter, lagging behind an 8 percent gain in the won and 5.6 percent for the rupiah,according to data compiled by Bloomberg.

                       Downgrade Unlikely

Standard Chartered says the Philippines is unlikely to face a credit-rating downgrade because of a widening budget deficit as the increase in spending will support economic growth ahead of elections scheduled for May 2010.The bank kept its budget deficit forecast for 2009 at 320 billion pesos ($6.8 billion) as the rebuilding following Tropical Storm Ketsana will require additional spending. The government projects a record shortfall of 250 billion pesos.

“Even with the higher deficit, the Philippines does not face a near-term risk of a rating downgrade,” Harr said. “Investors are not yet focused on next year’s elections,” muting political risks, he said.The central bank, which meets on monetary policy tomorrow, will keep its overnight borrowing rate at a record low of 4 percent and hold it there for 2009 and 2010, Harr wrote.
 
“We expect the Philippine economy to recover over the next two years,” according to the note that Harr co-wrote with economist Simon Wong. “Remittances tend to pick up in the fourth quarter, ahead of Christmas.”

Standard Chartered raised its short-term rating on the peso to “overweight” from “neutral.”

Yen Rallies to Seven-Month High as Japan Opposes Intervention

The yen rose to a seven-month high versus the dollar as Japan’s new government reiterated its opposition to intervening to stem a currency’s gain and the Federal Reserve pledged to keep interest rates low.

Sterling dropped to a three-month low below $1.60 this week after Bank of England Governor Mervyn King was quoted by a newspaper as saying the pound’s weakness is aiding in rebalancing the U.K.’s economy. The dollar reached a one-year low versus euro on increased demand for riskier assets before a report next week forecast to show U.S. job losses slowed.

“The yen is getting a benefit from the fact that there is no political intervention, and that it’s not the whipping boy,” said Boris Schlossberg, director of currency research in New York at the online currency trader GFT Forex.


Japan’s yen advanced 1.8 percent this week to 89.64 per dollar, from 91.29 on Sept. 18. It touched 89.51 yesterday, the strongest level since Feb. 5. The currency gained 2 percent to 131.70 per euro, from 134.33 The dollar rose 0.2 percent to $1.4689 per euro, from $1.4712, after touching $1.4844 on Sept. 23, the weakest level since Sept. 22, 2008.

A break in the yen below 89.50 per dollar would “rechallenge” 87.15, wrote Thomas Anthonj, a technical analyst at JPMorgan Chase & Co. in London in a note yesterday. The yen reached 87.13 on Jan. 21, the strongest level since 1995.

Canada’s currency dropped 2 percent to C$1.0910 per U.S. dollar in its biggest weekly loss since June as crude oil, the nation’s biggest export, declined 8.3 percent to $66.07 a barrel. The currency appreciated 12 percent this year.

Bank of Canada

Bank of Canada Governor Mark Carney said he’s concerned when the Canadian dollar moves away from “fundamental” levels, according to the transcript of an interview with the Canadian Broadcasting Corp. released yesterday.

Sterling slid 2.1 percent versus the dollar this week after the Newcastle Journal reported on Sept. 23 that King called the currency’s drop “very helpful.” The pound fell yesterday to $1.5918, the lowest level since June 8, and depreciated to 91.19 per euro, the weakest level since April 1.

Barclays Capital lowered its three-month forecast for the dollar to $1.52 per euro yesterday, from $1.40. “Excess liquidity” stems from a Fed monetary policy that’s “buoying risky assets indiscriminately while punishing” the greenback, wrote David Woo, global head of foreign-exchange strategy in London in a note.

Fed Asset Purchases

The Fed said on Sept. 23 that it would end its $1.45 trillion in purchases of mortgage-backed securities and housing agency debt in March rather than in December and left the fed funds target at zero to 0.25 percent. Policy makers recommitted to keeping the rates “exceptionally low” for an “extended period,” even as the economy shows signs of recovery.

U.S. companies probably cut 180,000 jobs in September, after shedding 216,000 in the prior month, according to the median forecast of 58 economists surveyed by Bloomberg News. The Labor Department is due to release the report on Oct. 2.

The yen advanced against all its major counterparts except the South Korean won as Japan’s Finance Minister Hirohisa Fujii said at the Group of 20 meeting in Pittsburgh on Sept. 24 that he has been questioning the idea of “easy intervention.”

Fujii, whose Democratic Party of Japan took office for the first time this month, referred in comments to reporters to a previous pledge of the nations to refrain from pursuing a currency-devaluation strategy.

Fujii on Yen

“I don’t intend to take a strong yen policy but, at the same time, a deliberate weaker-currency policy was denounced” at the G-20 summit in London earlier this year, Fujii said.

Fujii said last week he didn’t support a “weak yen,” fueling speculation Japan won’t resort to intervention to curb yen’s appreciation. Central banks intervene in foreign-exchange markets by selling and buying currencies.

Japan’s currency rose 3.6 percent to 142.90 versus the pound this week and appreciated 3.8 percent to 6.62 against the Mexican peso.

The yen gained 7.3 percent against the dollar this quarter and advanced 2.7 percent versus the euro. The rally contributed to a 36 percent decline in Japan’s exports in August from a year earlier and weighed on Japanese stocks. The Nikkei 225 Index rose 4.8 percent in the past three months, compared with a 14.2 percent increase in the Standard & Poor’s 500 Index.

The yen’s current level of about 90 per dollar is “painful,” Toyota Motor Corp. Executive Vice President Yukitoshi Funo told reporters yesterday.

Goldman Sachs View

“While policy statements on the yen remain confusing, the tightening in Japanese financial conditions is having a damaging impact,” wrote Dominic Wilson, a senior global economist at Goldman Sachs Group Inc. in New York, in a note to clients yesterday. “The market appears to be voting that the economy ‘needs’ a weaker yen, even if it is not yet getting it.”

The yen also gained on prospects the nation’s exporters will take advantage of an April 1 rule change that waives taxes on repatriated profits. Under previous laws, companies had to pay a combined 40 percent tax on overseas earnings. The first half of Japan’s fiscal year ends Sept. 30.

South Korea’s won rose for a fifth week versus the dollar in its longest winning streak since April as confidence the economy is recovering from a recession helped draw funds from abroad. The won gained 1.8 percent and touched 1,185.30 per dollar yesterday, the strongest level since October 2008. The won increased 0.1 percent to 13.2148 versus the yen.

(Source Bloomberg News)

Technical Analysis in Forex

What is Market Trend?

Trend is simply the overall direction in which prices are moving-- UP, DOWN, OR FLAT.

Types of Trends
The direction of the trend is absolutely essential to trading and analyzing the market. In the Foreign Exchange (FX) Market, it is possible to profit from both UP and Down movements, because the buying and selling of one currency is always linked to another currency e.g. BUY US Dollar SELL Japanese Yen.

Up Trend

As the trend moves upwards the US Dollar is appreciating in value

Down Trend
As the trend moves downwards the US Dollar is depreciating in value.

Sideways Trend
Prices are moving within a narrow range (The currencies are neither appreciating nor depreciating)

Trend Classifications

Information About Trend lines

The basic trend line is one of the simplest technical tools employed by the trader, and is also one of the most valuable in any type of technical trading. For an up trend line to be drawn, there must be at least two low points in the graph, where the 2nd low point is higher than the first. A price low is the lowest price reached during a counter trend move.

 

 

Trend Analysis and Timing

Markets don't move straight up and down. The direction of any market at any given time is either Bullish (Up), Bearish (Down), or Neutral (Sideways). Within those trends, markets have countertrend (backing & filling) movements. In a general sense "Markets move in waves", and in order to make money, a trader must catch the wave at the right time.

 

 

Drawing Trend lines

Trend lines I

Drawing Trend lines will help to determine when a trend is changing

 Trend lines II

Trend lines show support boundaries under prices. These boundaries may be used as buying areas.

 Trend lines III

Temporary trend line penetrations are not as significant as a close beyond the trend line.

Channel Lines

When prices remain within two parallel trend lines they form a Channel. When prices hit the bottom trend line this may be used as a buying area. Similarly, when prices hit the upper trend line this may be used as a selling area.

 Find Price Support Levels

Price supports are price areas where traders find it is difficult for market prices to penetrate any lower. Buying interest in the dollar is strong enough to overcome Selling interest in the dollar, keeping prices at a sustained level.

Finding Price Resistance Levels

Resistance is the opposite of support, representing a price level where Selling Interest overcomes Buying interest and advancing prices are turning back.

 

50% Retracements

33% and 66% Retracements

Forex News: US Dollar

The US Dollar experienced an exciting trading day on Monday as a rise in risk averse trading helped add an early morning boost, followed by a retracing of Friday's levels. Against the EUR, the greenback climbed to as high as 1.4610 before coming back down and closing the day at 1.4717. Versus the British Pound, the USD gained as much as 90 pips, with a high mark of 1.6134, before coming back up and closing out the trading day at the 1.6250 level.


With a decision regarding the Federal Funds Rate looming, traders are becoming more aware of the potential delay in any increase to short-term interest rates due to the instability of global economies recently. Britain has made similar overtures, as did the Euro-Zone in its recent discussions. However, the question still remains over whether the global economy is indeed recovering as many were expecting. This uncertainty drives many investors back into safe-havens for the short-run until things become clearer.


As far as the North-Western Hemisphere is concerned today, the United States is not due to release much data of concern. Canada, on the other hand, is going to release vital data regarding its retail sales levels, which last week caused a stir among the USD and EUR. Growth in Canadian sales may help return the Loonie back to a bullish posture, but forecasts appear modest at best. This Wednesday's US interest rate decision appears to be this week's primary event for Dollar traders.

Hatoyama Yen Repels Goldman Seeing 8% Slide on Growth

Hirohisa Fujii, Japan’s new finance minister, says he doesn’t support a weak yen. The world’s biggest banks say that’s just what he may get.

While the yen gained against all but one of the 16 most- actively traded currencies since early August as the Democratic Party of Japan became the likely winner in national elections, forecasters say it will decline 5.2 percent against the dollar and 0.7 percent versus the euro by year-end. The economy is too weak to support a stronger rate, based on the median of 40 estimates in a Bloomberg survey.

Japan will be the only Group-of-10 nation that won’t raise borrowing costs in 2010, keeping its benchmark interest rate at a record low 0.1 percent, the survey shows. The economy will expand 0.8 percent next year after contracting 6 percent in 2009, according to median forecasts, putting assets in the world’s second-biggest economy at a disadvantage to those in countries with higher borrowing costs.

“Everyone is seemingly buying the yen, which I think is ridiculous,” said Jim O’Neill, head of global economic research at Goldman Sachs Group Inc. in London. “The true underlying fundamentals for the yen in my book have deteriorated significantly.”

New York-based Goldman Sachs, which earned more than $100 million from trading for a record 46 days last quarter, predicts the yen will weaken to 98 per dollar and 142 per euro by the end of the year, from 92.23 and 135.25 as of 7:09 a.m. in New York today. Bank of America Corp., the biggest U.S. bank, and HSBC
Holdings Plc, the largest in Europe, are even more bearish.

                           Yen’s Rally

The yen rallied 6.6 percent against the dollar and 3.3 percent compared with the euro as the Democratic Party of Japan, led by Yukio Hatoyama, 62, gained in the polls on the way to an election victory in the lower house of Parliament on Aug. 30 that broke 55 years of almost uninterrupted rule for the Liberal Democratic Party. Only the South African rand has risen more.

During the campaign, the DPJ said a stronger yen will boost household spending by making imported goods less expensive.
That’s in contrast to the former administration’s focus on public works spending and keeping the yen weak to help exporters.

Fujii, 77, reiterated that message on Sept. 16, the day the DPJ officially took over, saying he doesn’t support a “weak yen.” The comments drove the currency to 90.13 per dollar, its strongest level since February. The following day, he said it was an “absurd idea” that a weak yen is better for exports.

                       Suffering Exporters

Shares of Aichi-based automaker Toyota Motor Corp., which makes about 75 percent of its revenue outside of Japan, dropped 1.1 percent on the day of Fujii’s comments even as the Nikkei
225 Index added 0.5 percent.

In a Cabinet Office survey released April 22, exporters said they can remain profitable as long as the yen trades at 97.33 per dollar or weaker. A rising currency hurts exporters by making their goods more expensive to foreign buyers and reducing the value of profits earned abroad. Exports account for 12
percent of Japan’s economy, compared with 6 percent in the U.S.

Tokyo-based Canon Inc., the world’s biggest maker of office equipment, said in its latest financial report every 1 yen change against the dollar would alter its second-half operating profit by 4.2 billion yen ($46 million).
“Fujii’s words will come to haunt him,” said Richard Benson, who oversees $14 billion of currency funds at Millennium Asset Management in London. “The DPJ’s strong-yen policy will hurt the Japanese stock market, leading domestic investors overseas in search of returns, selling the yen in the process.”

                          Exports Plunge

Exports plunged at an unprecedented 26 percent rate in the three months ended March 31, contributing to the economy’s record 15.2 percent contraction in the quarter. The public debt is almost 200 percent of the  economy, compared with about 48 percent in the U.S., according to data compiled by Bloomberg.

The surplus in Japan’s current account, the broadest measure of trade because it includes investment, is shrinking relative to the size of the economy. The measure will fall to 2.1 percent of gross domestic product this year, based on median estimates in Bloomberg economist surveys, from 4.8 percent in 2007 and 3.2 percent in 2008. The household savings rate will drop to 2 percent this year from 3.3 percent in 2008 and more than 10 percent a decade ago, Goldman Sachs says.

                       Strength ‘Illusion’

     “Yen strength is an illusion with short-term investors,” said Tomoko Fujii, Tokyo-based senior currency strategist at Bank of America Securities-Merrill Lynch. The Charlotte, North Carolina-based firm expects the yen to weaken to 105 per dollar and to 158 per euro by Dec. 31. “They’re jumping to the conclusion that the government change will boost the yen, but that’s not the case because there’s no benefit in killing off the exporters,” she said.

Deutsche Bank AG, the world’s biggest currency trader, says the yen will rally to 80 to the dollar by year-end. U.S. interest rates near zero will encourage investors to finance purchases of higher-yielding assets with the U.S. currency at the same time that the improving world economy boosts demand for Japan’s exports.

“Yen is back,” Bilal Hafeez, Deutsche Bank’s London-based head of foreign-exchange strategy wrote in a report to clients on Sept. 17. “The yen may end up being the biggest winner against the dollar.” The three-month dollar London interbank offered rate, or Libor, fell below the comparable Japanese rate last month for the first time since April 1993. Dollar Libor was 0.29 percent on Sept. 18, while yen Libor was 0.35 percent, according to the British Bankers’ Association in London.

                          Options Bets

     Options traders are betting the yen will rise against all other Group of 10 currencies in the next three months. The cost of contracts used to bet the yen will appreciate versus the dollar are the most expensive relative to those betting on a decline since July 30, so-called 25-Delta Risk Reversals show.
     Japanese investors are showing less confidence in their currency. They bought the most foreign bonds in four years last week, purchasing a net 1.66 trillion yen in the period to Sept.12, according to Ministry of Finance figures released Sept. 17. The drop in short-term rates reduces the expenses of hedging purchases of foreign bonds, said Keiko Onogi, a Tokyo- based debt strategist at Daiwa Securities SMBC Co., a unit of Japan’s second-largest brokerage.

                       Exchange Rates

     Individual investors in Japan added to foreign currency mutual funds every month since January, according to Investment Trust Association data. Assets in the funds reached 26.9 trillion yen in August, the most since September and up from 20.7 trillion yen in January.

Bank of Japan Governor Masaaki Shirakawa told reporters in Tokyo on Sept. 17 that while stimulus measures, including buying $20 billion of government debt a month, have helped the economy,
policy makers are “not confident about the strength” of consumer demand “after those effects fade.”

The central bank is monitoring the exchange rate, which is contributing to a drop in inflation, he said. Consumer prices excluding food plunged at a record 2.2 percent pace in July while the jobless rate hit an unprecedented 5.7 percent the same month, government reports showed.

“The yen is inappropriately strong,” said David Bloom, global head of foreign-exchange strategy in London at HSBC. The government “will mind given the massively deflationary threat Japan is still facing,” he said.

HSBC, the biggest European bank, is telling its clients that the currency will weaken to 105 per dollar and 158 per euro by March 31.

                      Intervention History

     Japanese officials have responded to yen strength in the past by intervening in currency markets, including when Fujii was finance minister between 1993 and 1994. Authorities sold the currency on all four of the last five times since 1995 when the yen approached the 100-per-dollar mark to support exporters.

     The Bank of Japan, on behalf of the Ministry of Finance, sold a record 20.4 trillion yen in 2003 and 14.8 trillion yen in the first quarter of 2004, when it traded as high as 103.42 per dollar. The yen declined to an eight-month low of 114.88 versus the dollar in May that year. “I suspect the people at the Bank of Japan and the Ministry of Finance will start briefing Fujii on what he should and shouldn’t say,” said Neil MacKinnon, global macro strategist in London at VTB Capital Plc, an investment bank.

“Incoming policy makers often make a public view on a currency, only for it to be clarified, reviewed or withdrawn once their advisers have a word with them.”

(Source: Bloomberg News)

A Little About Forex Brokers

Many of you must have seen glossy ads for Forex Trading claiming a great amount of profit & a high leverage. Although it would not be proper to say that all the claims are sham, one can safely say that the claims are always inflated to attract gullible investors. No doubt, forex could lead you to the path of prosperity provided you are well equipped with proper strategy & in-depth analysis.

Here the need for forex broker comes into picture. This article would discuss the meaning & rational for existence of forex brokers in the currency market.

As many of you must be knowing the forex trading is mainly of OTC (Over the counter) nature. Now what do we mean by OTC? OTC means ‘Non Exchange Traded’. Let me elaborate this a little more. In case of Equity (stocks) & Futures the trade occurs on one or more Stock exchanges. In case of OTC products, which includes Forex, the trading that is buying & selling is done between the private parties & they are in more vicinity than any trade you may enter for Equity & Futures. When you buy or sell any equity or future you buy it from the Stock Exchange & you don’t know who is selling what the scrip you are buying or vise a versa.

Conversely, in case of OTC trades you are buying & selling from individual parties as no designated place such as Stock Exchange is involved.

Coming back to Forex trading, OTC in this context means Over the Counter of Banks & other Financial Institutions who usually trade currencies in millions & greater amounts.

This accounts for the major part of total world wide currency trade.

Now you would ask then how come it would be possible for us to start Forex trading with a few hundred Dollors as many of the Ads claim that you can definitely make a start with small amounts like $500? This is possible due to Forex brokers.

Although the majority of forex trade occurs at Banks’ & FIIs’ level the forex brokers facilitate for retail forex trade where individual investors can trade forex with a small & affordable amount.

Forex brokers acts as a link between the big forex market (where large dealers like banks & FIIs trade) & the individual retail traders.

So why do we need forex brokers? The first & most important reason is to facilitate the individual retail investors to enter the forex market although indirectly & that through forex brokers. Forex brokers trade with the collective amounts of all small retail investors.

Now once you start the trading through the forex brokers what next?

You need to make reasonable profit from the forex trading.

Believe me, its not an easy task to make instant profit as many of the forex programs claim. To make a profit from forex trading you need to understand all the intricacies of forex trading. As all of you know the forex trading is 24x7 & is carried out all over the globe. To do any analysis you need trading data. In case of listed securities the data can be easily available through Exchanges. However, in case of forex trading the data is not so easily available mainly because of dispersion of trading places across the markets over the globe. Also the traders being individual parties the data is not in a standardized format.

A forex broker could help you to understand the forex market & may guide you with their own analysis. Forex brokers can afford to hire specialized professionals who do all the complex market analysis & help you to make a trading decision.

To summarize a forex broker is a link between the retail investor & larger forex market players who facilitates the retail forex traders to enter the forex market who otherwise could not have entered due to the large amounts involved.

Following points would summarize the rational of there being forex brokers in currency market:

1)The amount involved in forex trading is usually very huge. Forex brokers are required for an individual retail forex trader to enter the forex market. This is facilitated by the leverage which many forex brokers usually offer.

2)The individual retail investor might not be well versed with all the technicalities of Forex trading. So without an analysis of the market it could be a fatal thing to trade forex & the trader might end up losing all the capital.

3)With proper guidance & tips from the forex broker one can reap the benefits of speculation in the currency market.

As all of you would agree, you should be very careful while selecting the forex broker. This is really important because the whole fortune of your forex trading endeavor depends on the expertise & honesty of your forex broker.

In case of normal exchange traded securities like stocks & futures you are dealing with the Stock Exchange & the risk of contract for buying & selling of securities not being honored by any party (Yourself or the Exchange) is NIL. The exchange takes the guarantee that all the contracts are honored as agreed between the parties involved.

In case of forex trading, in the absence of designated exchange, the risk of default from either side is high. (This risk is prevalent in almost all kind of OTC products).

Forex trading although of OTC nature is now a days well organized & regulated. You need to check that whoever broker you select should be well regulated & should follow the underlying guidelines as might be prescribed by the Regulating Authority.

Forex: Most used terms A to Z

Accrual - The apportionment of premiums and discounts on forward exchange transactions that relate directly to deposit swap (Interest Arbitrage) deals , over the period of each deal.

Adjustment - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or. Adjustment - Official action normally by either change in the internal economic policies to correct a payment imbalance or in the official currency rate or.

Appreciation - A currency is said to 'appreciate' when it strengthens in price in response to market demand.

Arbitrage - The purchase or sale of an instrument and simultaneous taking of an equal and opposite position in a related market, in order to take advantage of small price differentials between markets.

Ask (Offer) Price - The price at which the market is prepared to sell a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can buy the base currency. In the quotation, it is shown on the right side of the quotation. For example, in the quote USD/CHF 1.2627/32, the ask price is 1.2632; meaning you can buy one US dollar for 1.2632 Swiss francs.

At Best - An instruction given to a dealer to buy or sell at the best rate that can be obtained.

At or Better - An order to deal at a specific rate or better.

Balance of Trade - The value of a country's exports minus its imports.

Bar Chart - A type of chart which consists of four significant points: the high and the low prices, which form the vertical bar, the opening price, which is marked with a little horizontal line to the left of the bar, and the closing price, which is marked with a little horizontal line of the right of the bar.

Base Currency - The first currency in a Currency Pair. It shows how much the base currency is worth as measured against the second currency. For example, if the USD/CHF rate equals 1.2615 then one USD is worth CHF 1.2615 In the FX markets, the US Dollar is normally considered the 'base' currency for quotes, meaning that quotes are expressed as a unit of $1 USD per the other currency quoted in the pair. The primary exceptions to this rule are the British Pound, the Euro and the Australian Dollar.

Bear Market - A market distinguished by declining prices.

Bid Price - The bid is the the price at which the market is prepared to buy a specific Currency in a Foreign Exchange Contract or Cross Currency Contract. At this price, the trader can sell the base currency. It is shown on the left side of the quotation. For example, in the quote USD/CHF 1.2627/32, the bid price is 1.2627; meaning you can sell one US dollar for 1.2627 Swiss francs.

Bid/Ask Spread - The difference between the bid and offer price. Big Figure Quote - Dealer expression referring to the first few digits of an exchange rate. These digits are often omitted in dealer quotes.. For example, a USD/JPY rate might be 117.30/117.35, but would be quoted verbally without the first three digits i.e. "30/35".

Book - In a professional trading environment, a 'book' is the summary of a trader's or desk's total positions.

Broker - An individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission. In contrast, a 'dealer' commits capital and takes one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party.

Bretton Woods Agreement of 1944 - An agreement that established fixed foreign exchange rates for major currencies, provided for central bank intervention in the currency markets, and pegged the price of gold at US $35 per ounce. The agreement lasted until 1971, when President Nixon overturned the Bretton Woods agreement and established a floating exchange rate for the major currencies.

Bull Market - A market distinguished by rising prices.

Bundesbank - Germany's Central Bank.

Candlestick Chart - A chart that indicates the trading range for the day as well as the opening and closing price. If the open price is higher than the close price, the rectangle between the open and close price is shaded. If the close price is higher than the open price, that area of the chart is not shaded.

Cash Market - The market in the actual financial instrument on which a futures or options contract is based.

Central Bank - A government or quasi-governmental organization that manages a country's monetary policy. For example, the US central bank is the Federal Reserve, and the German central bank is the Bundesbank.

Chartist - An individual who uses charts and graphs and interprets historical data to find trends and predict future movements. Also referred to as Technical Trader.

Cleared Funds - Funds that are freely available, sent in to settle a trade.

Closed Position - Exposures in Foreign Currencies that no longer exist. The process to close a position is to sell or buy a certain amount of currency to offset an equal amount of the open position. This will 'square' the postion.

Clearing - The process of settling a trade.

Contagion - The tendency of an economic crisis to spread from one market to another. In 1997, political instability in Indonesia caused high volatility in their domestic currency, the Rupiah. From there, the contagion spread to other Asian emerging currencies, and then to Latin America, and is now referred to as the 'Asian Contagion'.

Collateral - Something given to secure a loan or as a guarantee of performance.

Commission - A transaction fee charged by a broker.

Confirmation - A document exchanged by counterparts to a transaction that states the terms of said transaction.

Contract - The standard unit of trading.

Counter Currency - The second listed Currency in a Currency Pair.

Counter party - One of the participants in a financial transaction.

Country Risk - Risk associated with a cross-border transaction, including but not limited to legal and political conditions.

Cross Currency Pairs or Cross Rate - A foreign exchange transaction in which one foreign currency is traded against a second foreign currency. For example; EUR/GBP

Currency Symbols AUD - Australian Dollar CAD - Canadian Dollar EUR - Euro JPY - Japanese Yen GBP - British Pound CHF - Swiss Franc

Currency - Any form of money issued by a government or central bank and used as legal tender and a basis for trade.

Currency Pair - The two currencies that make up a foreign exchange rate. For Example, EUR/USD

Currency Risk - the probability of an adverse change in exchange rates.

Day Trader - Speculators who take positions in commodities which are then liquidated prior to the close of the same trading day.

Dealer - An individual or firm that acts as a principal or counterpart to a transaction. Principals take one side of a position, hoping to earn a spread (profit) by closing out the position in a subsequent trade with another party. In contrast, a broker is an individual or firm that acts as an intermediary, putting together buyers and sellers for a fee or commission.

Deficit - A negative balance of trade or payments.

Delivery - An FX trade where both sides make and take actual delivery of the currencies traded.

Depreciation - A fall in the value of a currency due to market forces.

Derivative - A contract that changes in value in relation to the price movements of a related or underlying security, future or other physical instrument. An Option is the most common derivative instrument.

Devaluation - The deliberate downward adjustment of a currency's price, normally by official announcement.

Economic Indicator - A government issued statistic that indicates current economic growth and stability. Common indicators include employment rates, Gross Domestic Product (GDP), inflation, retail sales, etc.

End Of Day Order (EOD) - An order to buy or sell at a specified price. This order remains open until the end of the trading day which is typically 5PM ET.

European Monetary Union (EMU) - The principal goal of the EMU is to establish a single European currency called the Euro, which will officially replace the national currencies of the member EU countries in 2002. On Janaury1, 1999 the transitional phase to introduce the Euro began. The Euro now exists as a banking currency and paper financial transactions and foreign exchange are made in Euros. This transition period will last for three years, at which time Euro notes an coins will enter circulation. On July 1,2002, only Euros will be legal tender for EMU participants, the national currencies of the member countries will cease to exist. The current members of the EMU are Germany, France, Belgium, Luxembourg, Austria, Finland, Ireland, the Netherlands, Italy, Spain and Portugal.

EURO - the currency of the European Monetary Union (EMU). A replacement for the European Currency Unit (ECU).

European Central Bank (ECB) - the Central Bank for the new European Monetary Union.

Federal Deposit Insurance Corporation (FDIC) - The regulatory agency responsible for administering bank depository insurance in the US.

Federal Reserve (Fed) - The Central Bank for the United States.

First In First Out (FIFO) - Open positions are closed according to the FIFO accounting rule. All positions opened within a particular currency pair are liquidated in the order in which they were originally opened.

Flat/square - Dealer jargon used to describe a position that has been completely reversed, e.g. you bought $500,000 then sold $500,000, thereby creating a neutral (flat) position.

Foreign Exchange - (Forex, FX) - the simultaneous buying of one currency and selling of another.

Forward - The pre-specified exchange rate for a foreign exchange contract settling at some agreed future date, based upon the interest rate differential between the two currencies involved.

Forward Points - The pips added to or subtracted from the current exchange rate to calculate a forward price.

Fundamental Analysis - Analysis of economic and political information with the objective of determining future movements in a financial market.

Futures Contract - An obligation to exchange a good or instrument at a set price on a future date. The primary difference between a Future and a Forward is that Futures are typically traded over an exchange (Exchange- Traded Contacts - ETC), versus forwards, which are considered Over The Counter (OTC) contracts. An OTC is any contract NOT traded on an exchange.

FX - Foreign Exchange.

G7 - The seven leading industrial countries, being US , Germany, Japan, France, UK, Canada, Italy.

Going Long - The purchase of a stock, commodity, or currency for investment or speculation.

Going Short - The selling of a currency or instrument not owned by the seller.

Gross Domestic Product - Total value of a country's output, income or expenditure produced within the country's physical borders.

Gross National Product - Gross domestic product plus income earned from investment or work abroad.

Good 'Til Cancelled Order (GTC) - An order to buy or sell at a specified price. This order remains open until filled or until the client cancels.

Hedge - A position or combination of positions that reduces the risk of your primary position.

"Hit the bid" - Acceptance of purchasing at the offer or selling at the bid.
I
Inflation - An economic condition whereby prices for consumer goods rise, eroding purchasing power.

Initial Margin - The initial deposit of collateral required to enter into a position as a guarantee on future performance.

Interbank Rates - The Foreign Exchange rates at which large international banks quote other large international banks.

Intervention - Action by a central bank to effect the value of its currency by entering the market. Concerted intervention refers to action by a number of central banks to control exchange rates.

Kiwi - Slang for the New Zealand dollar.

Leading Indicators - Statistics that are considered to predict future economic activity.

Leverage - Also called margin. The ratio of the amount used in a transaction to the required security deposit.

LIBOR - The London Inter-Bank Offered Rate. Banks use LIBOR when borrowing from another bank.

Limit order - An order with restrictions on the maximum price to be paid or the minimum price to be received. As an example, if the current price of USD/YEN is 117.00/05, then a limit order to buy USD would be at a price below 102. (ie 116.50)

Liquidation - The closing of an existing position through the execution of an offsetting transaction.

Liquidity - The ability of a market to accept large transaction with minimal to no impact on price stability.

Long position - A position that appreciates in value if market prices increase. When the base currency in the pair is bought, the position is said to be long.

Lot - A unit to measure the amount of the deal. The value of the deal always corresponds to an integer number of lots.

Margin - The required equity that an investor must deposit to collateralize a position.

Margin Call - A request from a broker or dealer for additional funds or other collateral to guarantee performance on a position that has moved against the customer.

Market Maker - A dealer who regularly quotes both bid and ask prices and is ready to make a two-sided market for any financial instrument.

Market Risk - Exposure to changes in market prices.

Mark-to-Market - Process of re-evaluating all open positions with the current market prices. These new values then determine margin requirements.

Maturity - The date for settlement or expiry of a financial instrument.

Net Position - The amount of currency bought or sold which have not yet been offset by opposite transactions.

Offer (ask) - The rate at which a dealer is willing to sell a currency. See Ask (offer) price

Offsetting transaction - A trade with which serves to cancel or offset some or all of the market risk of an open position.

One Cancels the Other Order (OCO) - A designation for two orders whereby one part of the two orders is executed the other is automatically cancelled.

Open order - An order that will be executed when a market moves to its designated price. Normally associated with Good 'til Cancelled Orders.

Open position - An active trade with corresponding unrealized P&L, which has not been offset by an equal and opposite deal.

Over the Counter (OTC) - Used to describe any transaction that is not conducted over an exchange.

Overnight Position - A trade that remains open until the next business day.

Order - An instruction to execute a trade at a specified rate.

Pips - The smallest unit of price for any foreign currency. Digits added to or subtracted from the fourth decimal place, i.e. 0.0001. Also called Points.

Political Risk - Exposure to changes in governmental policy which will have an adverse effect on an investor's position.

Position - The netted total holdings of a given currency.

Premium - In the currency markets, describes the amount by which the forward or futures price exceed the spot price.

Price Transparency - Describes quotes to which every market participant has equal access.

Profit /Loss or "P/L" - The actual "realized" gain or loss resulting fromtrading activities on Closed Positions, plus the theoretical "unrealized" gain or loss on Open Positions that have been Mark-to-Market.

Quote - An indicative market price, normally used for information purposes only.

Rally - A recovery in price after a period of decline.

Range - The difference between the highest and lowest price of a future recorded during a given trading session.

Rate - The price of one currency in terms of another, typically used for dealing purposes.

Resistance - A term used in technical analysis indicating a specific price level at which analysis concludes people will sell.

Revaluation - An increase in the exchange rate for a currency as a result of central bank intervention. Opposite of Devaluation.

Risk - Exposure to uncertain change, most often used with a negative connotation of adverse change.

Risk Management - the employment of financial analysis and trading techniques to reduce and/or control exposure to various types of risk.

Roll-Over - Process whereby the settlement of a deal is rolled forward to another value date. The cost of this process is based on the interest rate differential of the two currencies.

Round trip - Buying and selling of a specified amount of currency.

Settlement - The process by which a trade is entered into the books and records of the counterparts to a transaction. The settlement of currency trades may or may not involve the actual physical exchange of one currency for another.

Short Position - An investment position that benefits from a decline in market price. When the base currency in the pair is sold, the position is said to be short.

Spot Price - The current market price. Settlement of spot transactions usually occurs within two business days.

Spread - The difference between the bid and offer prices.

Square - Purchase and sales are in balance and thus the dealer has no open position.

Sterling - slang for British Pound.

Stop Loss Order - Order type whereby an open position is automatically liquidated at a specific price. Often used to minimize exposure to losses if the market moves against an investor's position. As an example, if an investor is long USD at 156.27, they might wish to put in a stop loss order for 155.49, which would limit losses should the dollar depreciate, possibly below 155.49.

Support Levels - A technique used in technical analysis that indicates a specific price ceiling and floor at which a given exchange rate will automatically correct itself. Opposite of resistance.

Swap - A currency swap is the simultaneous sale and purchase of the same amount of a given currency at a forward exchange rate.

Swissy - Market slang for Swiss Franc.

Technical Analysis - An effort to forecast prices by analyzing market data, i.e. historical price trends and averages, volumes, open interest, etc.

Tick - A minimum change in price, up or down.

Tomorrow Next (Tom/Next) - Simultaneous buying and selling of a currency for delivery the following day.

Transaction Cost - the cost of buying or selling a financial instrument.

Transaction Date - The date on which a trade occurs.

Turnover - The total money value of all executed transactions in a given time period; volume.

Two-Way Price - When both a bid and offer rate is quoted for a FX transaction.

Unrealized Gain/Loss - The theoretical gain or loss on Open Positions valued at current market rates, as determined by the broker in its sole discretion. Unrealized Gains' Losses become Profits/Losses when position is closed.

Uptick - a new price quote at a price higher than the preceding quote.

Uptick Rule - In the U.S., a regulation whereby a security may not be sold short unless the last trade prior to the short sale was at a price lower than the price at which the short sale is executed.

US Prime Rate - The interest rate at which US banks will lend to their prime corporate customers.

Value Date - The date on which counterparts to a financial transaction agree to settle their respective obligations, i.e., exchanging payments. For spot currency transactions, the value date is normally two business days forward. Also known as maturity date.

Variation Margin - Funds a broker must request from the client to have the required margin deposited. The term usually refers to additional funds that must be deposited as a result of unfavorable price movements.

Volatility (Vol) - A statistical measure of a market's price movements over time.

Whipsaw - slang for a condition of a highly volatile market where a sharp price movement is quickly followed by a sharp reversal.

Yard - Slang for a billion.