Forex Investment and Currency Trading

Trading Strategy – The end of globalization?  Various national governments have had different levels of intervention. The Russian example stands out as they have spent $67 bn holding the RUB – more supporting their stocks – and it still looks wobbly but better by comparison to other less fortunate EM countries.  The moves in FX are now the tail of the dog called equities.  Fear factor is in EM still where there is so little liquidity that only semi-stability in G10 can allow anyone out in EM.  This is not sustainable and will lead to more volatility. At its worst the troubles in EM could lead to a bigger breakdown in the forces of globalization.  We have seen this movie before and it’s usually not pretty for the world.  There is plenty of reason to be moderate in this panic – the good news on bank earnings not being as bad as expected, on more intervention by various governments from Taiwan to India to Russia and now Switzerland who injected capital into UBS – all is better but somehow the stories of redemptions and losses overwhelm the mood here in the US at the open.  Libor falling overnight to the best levels since 2004 is swept aside by the 5 bps drop to 4.5% in 3M – as the year end squeeze for cash looks to be an event worse than the millennium.  The lack of trading is fooling some folks into thinking its calmer or safer than it really is – the instability in markets has reached beyond last week’s troubles if only because authorities have less tools to use to throw at the problem.  In this way – FX because it’s the most liquid asset class – may be worth considering more closely.  Expect the force to get to cash will benefit the USD and JPY and CHF. Gains in AUD, NZD overnight look more forced than real.