Forex : Depth Missing When Needed in $5.3 Trillion-a-Day Currency Market

Posted by Forexsq 23 days ago (
img Forex Market - Turbulent trading that made August the worst month for global equities since 2012 also revealed a widening crack in the world’s largest market-- foreign exchange.

Fabrizio Fiorini, chief investment officer at Aletti Gestielle SGR SpA in Milan, thought he was in luck as the financial turmoil curbed speculation the Federal Reserve would raise interest rates, sparking a stampede of dollar selling. To his dismay, he found that the gap between prices at which traders were willing to buy and sell major currencies had tripled, forcing him to pay a greater premium to purchase the greenback.

“During those two or three critical days in August, I was frustrated that liquidity, which seems to always be there when the market is quiet, disappeared when you need it the most,” said Fiorini, whose firm manages $18 billion. “Market makers are not able to provide liquidity the way they used to, and the market was too crowded with the same trades.”

The ability to exchange currenci

Nigeria Vows to Fight Forex Betting on Naira Devaluation

Posted by Forexsq 48 days ago (
img Nigeria’s central bank vowed to fight off speculators taking bets that the naira will be devalued after Kazakhstan became the latest country to abandon control of its currency.

“We haven’t seen any reason so far to institute a change in the foreign-exchange policies,” Ugochukwu Okoroafor, a spokesman for the Central Bank of Nigeria, said by phone from Abuja on Thursday. “The preponderance of foreign currency in the country has led to speculative attacks on the naira. People who have done it in the hope we’ll devalue will be hurt.”

After imposing trading restrictions in February to prevent dollars from fleeing Africa’s largest economy, importers have been unable to pay suppliers, a thriving black market has sprung up in foreign banknotes and a collapse in government oil revenue amid sliding crude prices has left teachers unpaid.

Kazakhstan’s decision to drop its peg for the tenge, which led to a 23 percent drop against the dollar, intensifies pressure on countries to let their

Who's Next in the Currency Market's Race to the Bottom?

Posted by Forexsq 47 days ago (
img Kazakhstan just intensified the global currency war.

By allowing a 23 percent plunge in the tenge, central Asia’s biggest oil exporter signaled a new wave of devaluations in developing nations forced to compete against weaker currencies. Egypt and Nigeria look the most vulnerable to John-Paul Smith, the ex-Deutsche Bank AG strategist who predicted Russia’s 1998 crisis and this year’s China’s rout.

To Bernd Berg, a London-based strategist at Societe Generale SA, African currencies like the naira and those of former Soviet Union countries “will be next.”

Developing nations are under increasing pressure from weaker currencies in China and Russia, plunging prices for commodity exports and the prospect of higher U.S. interest rates. Kazakh President Nursultan Nazarbayev, who earlier this year pledged to avoid any sharp depreciation, said today’s adjustment was essential to avoid a recession.

“The major commodity exporters are the most vulnerable,” Smith, who founded Ecstrat, a

The Fed Is Looking at a Very Different Dollar Than Wall Street

Posted by Forexsq 44 days ago (
img By many popular measures, the dollar has traded sideways for the last six months. Then there's the Federal Reserve's measure.

The greenback is surging, according to an index the Fed created to track the U.S. currency versus 26 of the country's biggest trading partners. It's risen 1.3 percent beyond a 12-year high reached in March, when the central bank fired the first of a series of warnings that a stronger dollar may hurt growth and lower inflation.

At a time when the Fed's tightening path has become one of the biggest drivers in the $5.3 trillion-a-day foreign-exchange market, the discrepancy between Wall Street's view -- largely based on the dollar's performance against the euro and the yen -- and that of policy makers may lead to a jolt for investors expecting recent ranges to persist. The rapid trade-weighted appreciation this quarter has come mostly against big exporters such as China and Mexico, and it undercuts the Fed’s goal of quicker inflation. It may trigger further

Black Monday because of China sinks world stocks and Forex Market

Posted by Forexsq 44 days ago (
img Alarm bells rang across world stocks and forex markets on Black Monday as a near 9 percent dive in China shares and a sharp drop in the dollar and major commodities panicked investors.

European stocks were more than 5 percent in the red and Wall Street was braced for similar losses after Asian shares slumped to 3-year lows as a three month-long rout in Chinese equities threatened to get out of hand.

Oil plunged another 4 percent, while safe-haven government U.S. an German bonds and the yen and the euro rallied as widespread fears of a China-led global economic slowdown and currency war kicked in.

"It is a China driven macro panic," said Didier Duret, chief investment officer at ABN Amro. "Volatility will persist until we see better data there or strong policy action through forceful monetary easing."

Many traders had hoped that such support measures, which could include an interest rate cut, would have come from Beijing over the weekend after its main stocks markets slumpe

Forex Market Biggest Day in Years as Investors Flee Risk

Posted by Forexsq 43 days ago (
img Traders in the $5.3 trillion-a-day forex market were busy Monday.

New Zealand’s dollar plunged as much as 8.3 percent, the most in 30 years, pacing declines by currencies of resource-producing nations amid a global market selloff. On the flip side, haven currencies surged on concern China’s slowing economy will damp global growth, with the yen climbing the most since 2010.

The U.S. dollar fell as traders pushed out expectations for higher interest rates from the Federal Reserve. The daily range of the ForexSQ Dollar Spot index, which measures the difference, or spread, between its intraday highs and lows, rose to levels investors last saw regularly during the financial crisis seven years ago.

“You’re talking about sovereign currencies moving that much, you’re not talking about equities -- it’s quite unusual,” Peter Gorra, head of foreign-exchange trading in New York at BNP Paribas SA, said by phone. “The spreads are naturally going to reflect the illiquidity in the market.”

Japanese Stocks Day Trader Made $34 Million

Posted by Forexsq 39 days ago (
img Japanese Stocks Day Trader Made $34 Million, While a lot of investors were hitting the panic button Monday, a Japanese day trader who’d made a big bet against the market timed the bottom almost perfectly and narrated a play-by-play of the trade to his 40,000 Twitter followers. He claims to have walked away with $34 million.

As financial markets got crazy this week, many people turned cautious. Some were paralyzed. Not the 36-year-old day trader known by the Internet handle CIS.

“I do my best work when other people are panicking,” he said in an interview Tuesday, about an hour after winding up the biggest trade of a long career betting on stocks. He asked that his real name not be used because he’s worried about robbery or extortion. To support his claims, he shared online brokerage statements showing his trades second by second.

CIS had been shorting futures on the Nikkei 225 Stock Average since mid-August, wagering it would fall. By the market close on Monday, a paper profit

Euro Drops as ECB Adjusts Bond-Buying Cap, Sees Downside Risks

Posted by Forexsq 34 days ago (
img The euro forex currency fell to a two-week low as the European Central Bank signaled it’s able to increase monetary stimulus to counter downside risks to growth and inflation.

The shared currency weakened versus all but one of its 16 major counterparts after President Mario Draghi said policy makers adjusted the parameters of their bond-buying program and lowered economic forecasts. The ECB raised the limit on its bond purchases under its quantitative-easing program to 33 percent per issue from 25 percent previously.

“Dovish Draghi taking markets by surprise,” said Valentin Marinov, head of Group-of-10 currency research at Credit Agricole SA’s corporate and investment-banking unit in London. Policy makers are “highlighting that they can adjust the size of QE if needed and finally signal that September 2016 may not be the end of QE.”

The euro dropped 0.8 percent to $1.1142 at 1:48 p.m. London time and touched $1.1124, its weakest level since Aug. 20. It dropped 0.9 percent to

Forex : Which Country Will Devalue Their Currency Next?

Posted by Forexsq 27 days ago (
img Forex trading news : They're small, hopelessly devoted to oil and at risk of dropping their currency pegs.

Meet Equatorial Guinea, Libya, the Republic of Congo and Oman.

When Kazakhstan abandoned its dollar peg in the wake of China's shock yuan devaluation it warned other oil-producing countries would have to do the same as the world enters a “new era” of low oil prices. Here's a quick look at the economies in those four nations.
Equatorial Guinea and Congo

The economic fortunes of Equatorial Guinea changed overnight with the discovery of oil in the mid-1990s. The former Spanish colony the size of Massachusetts was transformed into one of the world's fastest-growing economies, yet also left dangerously reliant on a single source of revenue at a time crude price are tanking. Energy accounts for nearly 90 percent of its gross domestic product and virtually all of its exports.

What could tip Equatorial Guinea over the edge is that the Central African CFA franc it shares wit

Pound Climbs Most in Week as UK Inflation Unexpectedly Accelerates

Posted by Forexsq 50 days ago (
img The pound rose the most in a week against the dollar after U.K. inflation unexpectedly accelerated and a core measure of price growth jumped to a five-month high.

Sterling strengthened against all 31 of its major peers as the Office for National Statistics said annual inflation quickened to 0.1 percent in July. The rate was forecast to remain at zero for a second month in a Bloomberg survey of economists. Annual core inflation reached 1.2 percent, up from 0.8 percent in June. U.K. government bonds declined.

The Bank of England has been discouraged from raising interest rates by slow growth in consumer prices, with annual inflation slipping below zero in April for the first time in more than half a century. Policy maker Kristin Forbes, who hasn’t voted for higher borrowing costs, warned Aug. 16 that keeping record-low rates for too long could harm the economic recovery.

“These numbers make it a little more likely that the hawks will be more vocal as we get to the end of the ye

China efforts to slow yuan currency fall hoist Europe shares, bond yields

Posted by Forexsq 55 days ago (
img European shares rallied on Thursday as calm returned to global markets after China's central bank said there was no basis for further depreciation of its yuan currency following a sharp devaluation this week.

U.S. stock futures ESc1 were up 0.3 percent, with shares having recouped a lot of their falls in the previous session already. The global rally in equities started on Wall Street in late trade on Wednesday, with major indexes ending roughly flat after falling in early trade.

The perkier mood in riskier assets soured investor appetite for safe-haven government bonds, which had benefited from a sharp sell-off in equity and commodity markets prompted by the devaluation that saw the yuan slide around 4 percent.

The People's Bank of China (PBOC) said there was no basis for more yuan depreciation in light of strong economic fundamentals, even though the yuan dropped for the third straight day.

The PBOC set its guidance rate at 6.4010 per dollar prior to the market opening,

What a Weaker Chinese Yuan Means for the World

Posted by Forexsq 56 days ago (
img The steepest slide in the yuan in two decades is a game changer. The last time the currency moved this much -- 1994 -- China's economy ranked as the world's eighth largest, just behind Canada's, and few outside its borders would have even been able to put a name to the currency.

Now, the nation's move to allow the market a greater say in setting the yuan level is roiling currencies, commodities and stocks the world over and reshaping the global economic outlook.

Can the Fed still lift off if the greenback keeps strengthening? Bank of America Merrill Lynch analysts are among those who think the yuan devaluation clouds the picture for Janet Yellen.

It was like money for jam -- borrow cheaply offshore, somehow get the funds to China to earn a hefty interest-rate margin, and sell out later with a currency gain to boot. A sustained yuan downturn would kill the carry trade.

Even putting aside a weaker yuan, deepening factory-gate deflation and the likely spillover to export pri

China Starts Currency War Again

Posted by Forexsq 57 days ago (
img China devalued the yuan in a move that rippled through global markets, as policy makers stepped up efforts to support exporters and boost the role of market pricing in Asia’s largest economy.

The central bank cut its daily reference rate by 1.9 percent, triggering the yuan’s biggest one-day drop since China ended a dual-currency system in January 1994. The People’s Bank of China called the change a one-time adjustment and said its fixing will become more aligned with supply and demand.

The announcement suggests policy makers are now placing a greater emphasis on efforts to combat the deepest economic slowdown since 1990 and reduce the government’s grip on the financial system. Authorities had been propping up the yuan to deter capital outflows, protect foreign-currency borrowers and make a case for official reserve status at the International Monetary Fund.

“The one-off devaluation of the fix and allowing more market-based determination takes us into a new currency regime,” s

Dollar swings up, stocks dip after solid U.S. jobs data

Posted by Forexsq 61 days ago (
img The dollar gained and Wall Street stock futures extended losses as U.S. jobs data came near enough to expectations to bolster bets the Federal Reserve will raise rates for the first time in nearly a decade this year.

The data showed 215,000 jobs were added in July, slightly below a Reuters poll of 223,000 jobs, but the unemployment rate held at a seven-year low of 5.3 percent and there were signs that wages were beginning to pick up.

U.S. stock futures extended earlier losses, dropping 0.2 percent on the day SPc1. The Dow Jones industrial average was set for its seventh day of losses - its worst run in four years.

The U.S. dollar jumped against a basket of other currencies .DXY, climbing 0.4 percent on the day to a four-month high of 98.271.

U.S. Treasury yields were flat at 2.23 percent as were European benchmark German yields.

European stocks .FTEU3 moved up slightly after the data, although the index remained down 0.3 percent on the day.

The prospect of higher ra

RBA Holds Rates, Omits Reference to Need for Currency Drop

Posted by Forexsq 64 days ago (
img Australia left its interest rates unchanged and omitted a reference to the need for the local dollar to fall further. The currency jumped more than 1 percent.

Central bank Governor Glenn Stevens and his board kept the cash rate at a record-low 2 percent, as predicted by markets and economists following reductions in May and February.

Stevens said in Tuesday’s statement the exchange rate “is adjusting to the significant declines in key commodity prices” after it fell through 73 U.S. cents in July. It is the first time in 18 months that he hasn’t signaled the currency was too high.

“It does look like they’ve watered down their jawboning of the currency,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at Royal Bank of Canada in Sydney. “If you draw a longer bow it kind of waters down their easing bias because part of the reason you have such a bias is to keep pressure on the currency.”

Australia has so far had little success in stimulating industries a

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