Currency - General News

[kennynah]

i need another scholar to explain to me in simpler england.....

[iam802]

Ask Ben.

[winston]

The Crowd Is About to Get Destroyed in Currency Trading By Porter Stansberry

Several weeks ago, I was invited to a client meeting in Miami held by the wealth-management firm AllianceBernstein.

Bernstein's investment research has long been regarded as the best on Wall Street.

Why? Bernstein does honest, thorough work because it doesn't engage in investment banking. It's paid to be right, not to sell retail clients down the river to pull off a public stock offering or sell a bond.

In Miami, the firm's head economist spoke about the dynamics of the global currency markets and explained AllianceBernstein's trading strategy. It borrows in four to six currencies with low interest rates and buys four to six currencies with higher interest rates. This diversified approach reduces risk substantially. And it has historically produced better average returns than the S&P 500 with less volatility.

The presentation was designed to entice wealthy U.S. investors to open leveraged foreign-exchange trading accounts with AllianceBernstein. And I must say, the presentation was among the most sophisticated I've ever seen. The economist really knew his stuff. But... I was deeply troubled by the presentation.

In my experience, whatever the big brokers are pitching to retail clients, that's the thing most likely to blow up next. One year it's dot-com stocks, one year it's mortgage backed securities, one year it's commodity futures, and so on...

I'd never seen a Wall Street firm give a leveraged currency presentation to retail clients before. While this kind of trading can be very profitable, it is extremely risky – especially right now.

For the first time since just after World War I, we have serious sovereign debt problems in all of the major currencies. And for the first time in the history of man... we have a global monetary base that's not anchored to any real asset.

In fact, the largest reserve assets of the world's monetary system are the obligations of a bankrupt nation (the U.S.) that must print money to afford its own annual deficits (read my essay on this here).

This is a recipe for disaster.

I believe the entire system of paper money – globally – is coming unglued. The result will be a kind of volatility and disruption to the global economy the world hasn't seen since World War I, when the gold standard ended in 1914.

Ironically... ignorant of these enormous risks... retail investors are running full speed ahead into foreign-exchange trading.

Deutsche Bank reports its currency trading platform for retail clients saw a 40% increase in customers during 2009. In the U.S., foreign-exchange volume was up 28% last year – almost entirely because of retail trading.

I suspect these numbers will continue to grow for a while, but I urge you to avoid this looming disaster. It will be devastating to unsophisticated traders who don't practice sound position sizing and don't use stop losses.

While trading foreign currencies has been a good strategy for a long time... what will happen to those strategies as volatility soars and the large currencies collapse? No one knows.

But one thing I do know for sure: It won't end well for retail investors. Someone has to hold the bag for all of the world's paper money. Who do you think will end up holding the bag? Retail investors... or giant institutions like AllianceBernstein?

My advice for anyone itching for a currency trade: Trade worthless paper dollars for gold bullion. Trade them for silver. Repeat as often as possible.

Source: Daily Wealth

[winston]

China Economist: US Is Currency War's 'Tomb Maker'

The United States fired the first shot in the currency war and the rest of the world must be on guard for its deliberate strategy to devalue the dollar, a Chinese economist said in an official newspaper on Thursday.

In a front-page commentary in the overseas edition of the People's Daily, Li Xiangyang described the United States as the conflict's "first maker of tomb figures," a Chinese idiom that means someone who creates a bad precedent.

Li, head of the Asia department at the Chinese Academy of Social Sciences, a top government think tank, said continued intervention in currency markets by developed economies would deal a blow to global economic recovery.

Chinese leaders have warned before that loose monetary policies in the United States pose a serious challenge for emerging markets, but rarely in such strident language, a window onto the rising anger in Beijing.

"The dollar's depreciation may appear to be market-driven. In reality, it is a depreciation colored by very strong, deliberate actions," Li said in the paper, which serves as the chief mouthpiece of China's ruling Communist Party.

The overseas edition of the People's Daily is a smaller offshoot of the domestic edition.

Li said the Federal Reserve's announcement that it might soon launch another round of quantitative easing by buying bonds and other financial assets had been the key factor pulling down the dollar.

The motives were plain enough, he said.

Without a weaker dollar, the United States would have no hope of meeting President Barack Obama's goal to double exports in five years, Li said.

Dollar depreciation will also serve longer-term interests by generating inflation and easing the debt burden that the financial crisis dumped on the U.S. government.

"If the global financial crisis was about nationalizing private debt, then in the post-crisis period the urgent need of the United States is to internationalize its national debt," he said.


http://www.moneynews.com/StreetTalk/Chi ... /id/373657

[winston]

Currency Crisis! So What Happens If Both The US Dollar And The Euro Collapse?
By Michael Snyder

Some analysts are warning that the U.S. dollar is in danger of collapse because of the exploding U.S. government debt, the horrific U.S. trade deficit and the new round of quantitative easing recently announced by the Federal Reserve.

Other analysts are warning the the euro is in danger of collapse because of the very serious sovereign debt crisis that is affecting nations such as Greece, Portugal, Ireland, Italy, Belgium and Spain.

So what happens if the dollar and the euro both collapse? Well, it would certainly throw the current world financial order into a state of chaos, but what would emerge from the ashes? Would the nations of the world go back to using dozens of different national currencies or would we see a truly global currency emerge for the very first time?

Up until recently, the idea of a world currency was absolutely unthinkable for most people. In fact, the notion that all of the major nations around the globe would agree to a single currency still seems far-fetched to most analysts. However, if enough “chaos” is produced by a concurrent collapse of the U.S. dollar and the euro, would that be enough to get the major powers around the world to agree to a new financial world order?

Let’s hope not, but it is getting hard to deny that we are heading for a major currency crisis, and if the U.S. dollar and/or the euro collapse, the world will certainly never be the same afterwards.

In case you missed it, China and Russia made a very big announcement the other day.

They told the world that instead of using the U.S. dollar to trade with each other, they will now be using their own national currencies.

Most Americans don’t realize it, but that is a very, very big deal.

The fact that the U.S. dollar has been the primary reserve currency of the world for decades has given the United States a tremendous amount of economic power.

But now nations are beginning to lose confidence in the U.S. dollar and they are slowly starting to move away from it.

*Belgium’s debt has reached 100 percent of annual national income, and the cost of insuring that country’s debt has now hit record levels.

So if the U.S. dollar and the euro do collapse, what would happen?

Well, already many world leaders are openly speaking of the need for a true global currency.

After all, they argue, there won’t be any “currency wars” if we are all using the same currency.

In fact, the Institute of International Finance, an organization that represents 420 of the biggest banks and financial institutions on the globe, recently declared that the time has come to adopt a one world currency.

In fact, as I wrote in an article entitled “Bancor: The Name Of The Global Currency That A Shocking IMF Report Is Proposing“, a recent IMF policy paper actually proposed a name for the “global currency” that they believe could be coming….

So will any of this ever come to fruition?

Well, it would likely take one whale of a crisis to get the countries of the world to agree to such a thing.

Hopefully the U.S. dollar and the euro can remain stable currencies for at least a little while longer. Because once they collapse things will never, ever be the same again.


http://www.dailymarkets.com/forex/2010/ ... -collapse/

[winston]

Safe, Big Returns in a Simple Currency Strategy By Dr. Steve Sjuggerud

Here's a simple way to make money in currencies…

Buy what's working. And sell what's not.

Sounds simple, but it's worked.

Many studies have shown this "momentum effect" is true. In one study, Deutsche Bank tested an incredibly simple once-a-month currency-trading system, with excellent results. From 2000 through 2010, this simple strategy would have delivered a 6% annualized total return, versus 0% for the stock market.

Longer term, the results are good too… Since 1980, this simple trading system has delivered a compound total return of 8%, versus 11% for the stock market.

The simple currency system didn't beat the stock market since 1980… But that's OK. It delivered much less volatile returns than the stock market.

Take a look for yourself, stocks are in red below and the currency system is in blue (both are total returns):

In 2008, when everything went down – stocks, commodities, and real estate – this currency system was up over 20%. It wasn't just 2008… Stocks fell in six separate years since 1980. And this currency system was up in each of those years. It was a great way to add some diversification.

So what's the system? Here it is:

1) Buy whatever three currencies have performed the best over the last 12 months.
2) Sell short the three currencies that have performed the worst over the last 12 months.

One month later, size 'em up again, and rebalance as necessary.

Seems too simple to work. But it has.

This system tracks the 10 most easily traded currencies: the Australian dollar, Canadian dollar, Swiss franc, British pound, Japanese yen, Norwegian krone, New Zealand dollar, Swedish krona, U.S. dollar, and the euro.

Surprisingly to me, no one currency dominates in the trades…

Based on the Deutsche Bank study of this system, from 1989 to 2009, the Swiss franc had the biggest extremes… You were long Swiss francs 41% of the time. And you were short Swiss francs just 22% of the time. Those were the two extremes… In short, no currencies were left "sitting the bench" for long stretches. They're all in the game.

There's no "cherry picking" going on in Deutsche Bank's strategy… It simply uses the one-year gain and rebalances monthly, among the 10 most-traded currencies. Nothing fancy there. And it's worked.

Deutsche Bank has a fund that uses this strategy, based on its Currency Momentum Index. The Yahoo Finance symbol is DX2M.DE. (While it trades in Europe, it closely tracks the U.S. dollar Deutsche Bank Momentum Index.)

For more on this currency momentum fund, visit www.etf.db.com. Click on "Germany"… then, to read it in English, click on the British flag at the top right.

While I've talked about this specific study and this specific fund, my point today isn't for you to run out and buy this fund… My real point is to show you investing in currencies can work.

This simple Deutsche Bank system is one example that shows it. It delivers decent returns. And best of all it's been uncorrelated to stocks, real estate, or commodities.


www.dailywealth.com

[winston]

Why the Euro Plunged… and How to Profit By Dr. Steve Sjuggerud
Monday, May 9, 2011

The euro plunged three cents in no time on Thursday… and another two cents on Friday. That's a dramatic move for a currency.

What happened?

In short, Europe's equivalent of our own Fed Chair Ben Bernanke said he wasn't in a hurry to raise interest rates. That was all it took:

That was it? Why? Here's all you need to know…

Money flows where it's treated best.

By "treated best," I mean investors will move their money to where it earns the highest yield. And as I'll show in a minute, you can profit from this.

From firsthand experience, I know money flows where it's treated best…

As vice president of a global mutual fund back in 1994, I placed the orders for what to do with our cash overnight. And every night, we invested our excess cash in whichever safe major currency was paying the most interest. (That was back when you could actually earn some real interest!)

Thousands of other financial institutions and big companies around the world do the same thing… Every night, money flows to where it's treated best.

Last week, speculators were buying the euro in anticipation of a future interest rate hike in Europe. You see, the more Europe raises interest rates, the more the euro will attract big institutions. When speculators didn't get the news they wanted about interest rates going up, the euro plunged.

Once again, money flows to where it's treated best. And history shows you can exploit this for profit…

Deutsche Bank did a simple study of this idea – using a simple strategy. Deutsche Bank's simple system is to buy the three currencies with the highest interest rates and sell the three with the lowest interest rates (out of the 10 most traded currencies)… hold for three months… then rebalance.

The rules are simple… But the total returns are incredible…

Since 1980, this strategy has returned over 9% a year. It's been a good way to diversify, too… Except for 2008, whenever stocks went down in a year, this strategy went up that year.

Deutsche Bank has an ETF that tracks this strategy. It's listed in Germany. The symbol on Yahoo is DX2N.DE.

This simple system by itself is pretty good. But if you combine it with the simple currency momentum system I shared with you last week, you get something great…

Combining the two systems still returned 9% a year since 1980. But the combined system only had TWO losing years since 1980… and those losses were both less than 2%.

So we have a few lessons today…

1. Money flows where it's treated best. Among the major currencies, the one paying the highest interest rate has historically risen, as big investors move money to get higher rates.

2. You can make money by following a simple strategy to capitalize on this. And currency gains are usually uncorrelated to stock market gains. There's a fund that tracks this simple system: DX2N.DE.

3. By combining this system with the one I shared last week, you have a "holy grail" currency system of historic total returns of 9% a year with only two losing years since 1980.


I've now shared two ways to make money in currencies: through momentum strategies (like I showed you last week) and through strategies that exploit the idea that money flows where it's treated best.

If you're worried about stocks, bonds, commodities, real estate, whatever… consider diversifying some of your money into a currency strategy like the ones I've shared. The Germany-listed funds do it for you…


Source: Daily Wealth

[winston]

FXNEWS-Most emerging Asian currencies weighed by China's slower imports

Most emerging Asian currencies weaken after data showing China's imports up less than expected in April.

Currencies, linked to resources such as IDR and MYR, could come under some pressure from China's weaker imports, said Thio Chin Loo, a currency strategist with BNP Paribas in Singapore.

USD/MYR , which fell up to 0.2 pct before data, turns higher after the figures.

USD/IDR stays around session's high of 8,557. USD/SGD and USD/PHP also rises a little more after the data, although they largely consolidate.


Source: Reuters

[winston]

TOL:-

I have some HKD, SIN, MYR, AUD and EUR.

With Europe imploding and China slowing down, I should sell my EUR and AUD.

But what to switch them to ?
1) I dont want to have more SGD. A small place will not be able to recover from any catastrophe
2) I dont want to buy GLD at this price
3) And I think that the RMB trade is too crowded.

Maybe the following:-
1) Buy MYR ? But it will be election in Malaysia soon
2) Buy Silver ? But it can also go down further, although it has dropped 30%
3) BUY KRW ? People like their products and the Chinese are buying KRW too. And how will their northern cousins be behaving ?
4) Buy IDR ? And what will happen if there's a terrorist attack ?
5) Buy USD ? And wait for the spike in interest rates due to their massive deficit ..

[winston]

Second AFC coming ?

Speculators dump Asian currencies

SINGAPORE -- Short-term interbank speculators unwound exposure to emerging Asian currencies yesterday as growing debt crises in the euro zone and the United States boosted risk aversion, while the Philippine peso came under further pressure from the central bank’s review on banks’ non-deliverable forwards (NDFs).

Forecast Pte advised buying emerging Asian currencies such as the South Korean won and the Singapore dollar against the Australian dollar, as economists’ views turn increasingly dovish expecting the Australian central bank to cut interest rates.

The Philippine peso suffered from dollar-short covering yesterday amid broad risk-off trade.

The Korean won eased as foreign investors kept selling Seoul shares and interbank speculators covered dollar-short positions.

The Malaysian ringgit and the Indonesian rupiah slid as interbank speculators covered dollar-short positions.

http://www.bworldonline.com/content.php ... s&id=34929