Forex Investment and Currency Trading

Currencies
China: News stories that one-year NDFs imply a depreciation of the renminbi versus the dollar – but the issue is whether you use the fixing rate or the closing spot rate. Today’s closing rate is 0.42% weaker than the fixing rate, the widest spread since the new exchange rate regime came into effect. Of course, even if the closing rate is used in calculating the forward, the current premium is also the smallest since the start of the new exchange rate regime.

India: Has the RBI given up? Unconfirmed reports of U.S. dollar sales by state-owned banks. But today’s depreciation is the largest daily decline since May 14, 1998. Also the weakest spot rate in more than two years.

Korea: Largest daily depreciation against the U.S. dollar since August 6, 1998, a move that was likely made worse by yesterday’s holiday. Weakest spot rate since August 13, 2004.

Uruguay: Yesterday’s depreciation of the peso was its largest since September 19, 2002. Also puts the peso back to levels last seen on January 7.

Venezuela: Even Venezuela’s parallel rate has been suffering in response to the global financial turmoil. The point though is that bid-offer spreads have widened sharply to 4.40-4.80.

Equity markets
Asia: Korea down 6.1%. Which is the chicken, and which is the egg: the currency or the stock market? Shanghai -4.5% — now down 62.2% since the end of 2007. Hang Seng -5.4%.

Europe: Again hard to find any market posting an increase today except Slovakia.

Headlines
India: India Oil said that the depreciation of the rupee has offset any decline in oil prices.

Indonesia: The central bank did not adjust its benchmark one-month BI rate – currently at 9.25%. However, it did lower the overnight lending rate by 200 basis points to 10.25%, and increased the deposit rate to 8.25%. The measures were taken to ensure liquidity in the financial system following yesterday’s U.S. financial market developments. Earlier in the day, President Yudhoyono stated that the economy is being affected by global financial market turmoil but that there was no reason to expect a crisis similar to that in 1997.

Korea: Head of the Finance Ministry’s international finance bureau: “Our foreign exchange market reaction to the U.S. financial market instability is excessive.” “There’s a need to consider that the current account balance may improve soon given the recent drop in oil prices.”

Korea: The deputy finance minister stated today that the central bank will add foreign currency liquidity through dollar/won swaps if liquidity is lacking.
Singapore: Trade and Industry Minister: expects gradual easing of inflation, global economic outlook to remain poor