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Tide is Turning for the Aussie
June 29, 2011“Australia is about to enter a boom that should last decades…The Australian dollar is unlikely to go back to where it was, and manufacturing will shrink in importance to the economy, perhaps even faster than it has been.” This, according to Martin Parkinson, Treasury Minister of Australia. While 30 years from now, Mr. Parkinson’s prognosis [...]
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Emerging Market Currencies Brace for Correction
June 28, 2011“It was the spring of hope, it was the winter of despair,” begins Charles Dickens’ The Tale of Two Cities. In 2011, the winter of despair was followed by the spring of uncertainty. Due to the earthquake/tsunami in Japan, the continued tribulations of Greece, rising commodity prices, and growing concern over the global economic recovery, [...]
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NO QE3: What are the Implications for the Dollar?
June 25, 2011The verdict is nearly in; there will be no QE3. The second round of quantitative easing (‘
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Swiss Franc is the Only Safe Haven Currency
June 23, 2011According to conventional market wisdom, there are three safe haven currencies: the Swiss Franc, Japanese Yen, and US Dollar. It is to these currencies that investors flock whenever there is a crisis, or merely an outbreak of uncertainty, and for much of the period following the collapse of Lehman Brothers, the three were closely correlated. [...]
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Is it Possible to Trade Forex Part-time?
June 22, 2011This week, I came across an article in the San Francisco Gate (which, incidentally, has really ramped up its forex coverage over the last year) that addressed this very topic. Given that part-time forex traders probably outnumber those that practice the craft full-time, such an article was long overdue. In sum, the author advises part-time [...]
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Japanese Yen In “No Man’s Land”
June 20, 2011This, according to a hedge fund manager that has decided to cancel all of his fund’s bearish bets on the Japanese Yen. The reason: the yen is rising, and it’s unclear when – or even if – the government will intervene to push it back down. Even though the yen’s strength is fundamentally illogical, it [...]
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Forex Volatility Continues Rising
June 17, 2011This week witnessed another flareup in the eurozone sovereign debt crisis. As a result, volatility in the EUR/USD pair surged, by some measures to a record high. Even though the Euro rallied yesterday and today, this suggests that investors remain nervous, and that going forward, the euro could embark on a steep decline. There are [...]
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Euro Nears Breaking Point
June 16, 2011It’s deja vu all over again in the forex markets as another twist in the sovereign debt crisis has sent the euro tumbling by the greatest margin in nearly a year. It was only last month that I posted “The Euro (Still) has a Greek Problem,” and yet, forex markets are once again reacting to [...]
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S&P 500 Decouples from Euro?
June 14, 2011While I have written quite about forex correlations in recent posts, the focus has primarily been on correlations that exist between currencies. In this post, I would like to address a correlation that exists between currencies and other forex markets- specifically the relationship between the Euro and US stocks. If you look at the chart [...]
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Pound Stagnates, Lacking Direction
June 13, 2011The British Pound has struggled to find direction in 2011. After getting off to a solid start – rising 4% against the US dollar in less than a month - the Pound has since stagnated. At 1.625 GBP/USD, it is now at the same level that it was at five months ago. Given the paltry [...]
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Has the US Dollar Hit Bottom?
June 11, 2011In April, I declared that the dollar would rally when QE2 ended. That date – June 30 – is now only a few weeks away, which means it won’t be long before we know whether I was right. Meanwhile, the dollar is close to pre-credit crisis levels on a composite basis, and has already fallen [...]
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Emerging Market Currencies Still Look Good for the Long-Term
June 10, 2011In my previous update on emerging market currencies, I wrote that in the short-term, it’s important not to lump them all together; high-yielding currencies must be distinguished from low-yielding ones. In this post, I’m going to backpedal a bit and argue that over the medium-term and long-term, emerging market currencies as an asset class are [...]
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Currency Correlations, Part II: Canadian Dollar Begins its Decline
June 8, 2011In April, I wrote a post entitled, “Economic Theory Implies Canadian Dollar will Fall,” in which I argued that the currency’s impressive rise was belied by fundamentals. It seems the gods of forex read that post; since then, the Loonie has fallen 3% against the US dollar alone. Based on my reading of the tea [...]
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How to Trade the Franc-Yen-Dollar Correlation
June 6, 2011Last week, the Wall Street Journal published an article entitled, “Currency Correlations Lose Their Way for Now.” My response: It depends on which currencies you’re looking at. I, too, recently posted about the break-down of multi-year correlations, specifically involving the Australian Dollar and the New Zealand Dollar. However, one has to look no further than [...]
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Interview with FXStreet CEO Francesc Riverola: “I do not see a reason why spreads can not go down to zero.”
June 3, 2011Today’s interview is with the esteemed Francesc Riverola, CEO of FXStreet. Below, Francesc shares his thoughts on the future of the retail forex industry, government regulation, declining spreads, and how he became CEO of one of the biggest online brands in forex without ever making a single forex trade. Forex Blog: Could you briefly discuss [...]
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Is the Chinese Yuan the Most Reliable Forex Trade?
June 2, 2011Over the last six years, the appreciation of the Chinese Yuan has been as reliable as a clock. Since 2005, when China tweaked the Yuan-Dollar peg, it has risen by 28%, which works out to 4.5% per year. If you subtract out the two year period from 2008-2010 during which the Yuan was frozen in [...]
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Aussie is Breaking Away from Kiwi
May 31, 2011The correlation between the Australian Dollar and New Zealand Dollar is among the strongest that exists between two currencies. Given their regional bond and similar dependence on commodities to drive economic growth, perhaps this is no wonder. Over the last year, however, the Aussie has slowly broken away from the Kiwi. While the correlation between [...]
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New Zealand Dollar: Come Back to Earth!
May 31, 2011In March, I wondered aloud about whether the New Zealand Dollar might be the most overvalued currency in the world. Since then, it has continued its unlikely ascent, rising 10% on a correlation-weighted basis and 3% against the US Dollar, hitting a 26-year high in the process. While there are signs that the New Zealand [...]
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High-Frequency Traders Descend onto Forex Markets
May 29, 2011According to a recent report by the Wall Street Journal, high-speed traders are quickly establishing themselves as the main force in forex markets. Just like in other financial markets, a significant portion of trading volume is dominated by computerized trading, in which huge blocks of currency can change hands multiple times in mere milliseconds. While [...]
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Swiss Franc at Record Highs
May 27, 2011This month, the Swiss Franc touched a record high against not one, but two currencies: the US dollar and the Euro. Having risen by more than 30% against the former and 20% against the latter, the franc might just be the world’s best performing currency over the last twelve months. Let’s look at the prospects [...]