Forex Investment and Currency Trading

October was truly an extraordinary month. Price volatility in USD/CAD reached unprecedented extremes as new all-time wide daily, weekly and monthly ranges were established. But USD/CAD
was not alone, as record moves were also evident in a number other currencies and across asset markets. Crude oil saw the biggest monthly decline on record – from US$100/bl to US$64. The
same holds true for gold and the metal index. It should, therefore, not come as a surprise that commodity-based currencies underperformed as a group: AUD (-16% m-t-d), CAD (-13%), NZD
(-13%) and NOK (-12%). More importantly, with no relief in sight for commodities, none [...]

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USD/CAD hit 1.3017 on October 28 its highest level since September 2004, not coincidently as oil prices fell to their lowest level since May 2007 near US$60/b. Oil prices have since bounced toward US$65/b and USD/CAD has retreated from the peak, but the deteriorating growth outlook will limit any follow-through. The IMF’s base case for 2009 is for the global economy, at best, to just skirt a recession. Industrialized economies from the US to the UK, Germany, France, Japan, Switzerland, Sweden, New Zealand, and Australia are either in or teetering on the edge of recession, by the yardstick of two [...]

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Friday October 31, 2008
U.S. Economic Data and Events
Time / Event / Period / Market Call / Prior Read
8:30 Personal Income SEP 0.10%  0.50%
8:30 Personal Spending SEP -0.20%  0.00%
8:30 PCE Deflator (YoY) SEP  4.20%  4.50%
8:30 PCE Core (MoM) SEP 0.10%  0.20%
8:30 PCE Core (YoY) SEP 2.50%  2.60%
8:30 Employment Cost Index 3Q 0.70%  0.70%
9:45 Chicago Purchasing Manager OCT 48.0  56.7
10:00 U. of Michigan Confidence OCT F  57.5  57.5
10:00 NAPM-Milwaukee OCT  n/a  46
14:00 Fed’s Bernanke speaks on mortgage finance at UC Berkeley
The weak September employment report showed a sharp drop in both employment and the average workweek. As a result, the index of [...]

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So far, the spike in FX volatility and general USD strength has seen only one G10 central bank openly intervening to smooth currency depreciation – the RBA. However, after this month’s coordinated interest rate cuts, clear evidence of closer crosscountry cooperation on bank bail-outs and Monday’s G7 statement expressing “concern” on “excessive volatility on the exchange rate of the yen”, speculation continues to swirl on the prospect of coordinated central bank FX intervention.
Coordinated intervention has been a rare event in the last decade. Since the G3 central banks intervened to support a weakening USD in 1995, the only instance of [...]

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