Forex Investment and Currency Trading

The widening of basis in Brazil and Mexico in October to 6-month highs was a testament to the dollar
pinch, The lack of USD in spot came from a bad mix of a pullback in cross boarder lending by foreign banks, large stock of external private sector debt, significant FX derivatives exposure in the corporate sector, and outright hoarding of dollars. Aggressive intervention by their respective central banks offset some of the pressure. The additional USD30bn in Fed swap lines will reinforce this cushion provided by official intervention even if in Brazil’s case, the swap lines are used to neutralize the [...]

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Overnight:

Asian stocks sharply higher. Kospi up 12%, Nikkei up 10% today for a 30% rally in three days; European stocks more muted, up between 1-4%; US equity futures up over 3%; yen still under pressure as risk appetite improves on optimism that other central banks will also follow the Fed and cut rates further; USD weaker again; US treasuries lower; Oil up $1, but base and precious metals much higher. 3 month Euribor down 3bp to 4.79%, lowest level since 18 April.
Japan announces an economic stimulus plan worth yen 26.9tln, including new spending worth yen 5tln.
Reserve Bank of Australia Dep [...]

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October 31

Canada  - GDP
Consensus: -0.4%

Economics: Canadian economic activity is likely to be hit hard in August as the impact of a worsening U.S. economy, slumping commodity prices and weak manufacturing sector activity overwhelm the favorable support coming from the weakening domestic currency. Canadian GDP is expected to fall by a sizeable 0.4% M/M, following the brisk +0.7% M/M pace in July. Much of the weakness during the month is expected to come from the dramatic slowdown in manufacturing sector production, with sluggish retail and wholesale activity, and declining real commodity exports providing additional drag on activity. Looking ahead, the Canadian economy [...]

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When an investor buys a currency on the spot market, he doesn’t actually take possession of the currency – no more than a trader in corn futures has bushels of corn delivered to his doorstep. A spot purchase does, however, call for the currency to be delivered within two days. But instead of having the currency actually delivered to an investor’s account, it’s rest, or rolled over. In this way, a retail FOREX position can be held indefinitely.
The account may also fluctuate because of interest differential payments. For positions open at 5 p.m. EST there is a daily rollover (interest [...]

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