Forex Investment and Currency Trading

China – Policy challenge to ensure domestic soft-landing and cushion against external hard-landing. The Chinese authorities play a more crucial role than ever in ensuring at least 8% GDP in 2009, via moderately loose monetary policy and active fiscal policy.
Another key challenge for the PBoC is to prevent deflation and at the same time be wary of risks that its aggressive monetary loosening efforts will re-ignite inflation. Analysts expect any signs of deflation via yoy contraction in headline CPI to be temporary and unlikely to destabilize current FX policy of maintaining stable and gradual CNY appreciation.
Short-term macro risks will likely [...]

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EM currencies will likely fluctuate within a wide range into 2009. The rapid ease by advanced economy central banks as well as an increasing number of EM institutions heightens the scope for a continuation of volatility. Currency volatility in EM will likely remain at historically high levels.
Currencies in EM will also demonstrate quite varying returns on a year-to-year basis in 2009, in addition to a wide range of fluctuations. PLN, BRL, CLP, IDR and HUF will likely demonstrate the largest currency returns versus the USD during the course of the year.
Conversely, ARS, RON, TWD, PHP, and SGD will likely slide [...]

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On 16 December the Federal Reserve took the target funds rate down to a range of 0%-0.25% and said that “weak economic conditions are likely to warrant exceptionally low levels for some time”. The Fed also said that it would “employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability”. Hence, quantitative easing measures are now the main focus such as the purchase of agency debt and mortgage-backed securities. Market expects the Fed to maintain the target fund rate at 0%-0.25% in 2009 and maintain the quantitative easing policy for as long as [...]

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Korea cuts 100bp, KRW surges. The Asian FX rally picked up pace during the session, this time not relying on a large equity bounce for fuel. Rather, positioning seems to be the driver as long USD/Asia trades are unwound ahead of year end. USD/SGD sank from above 1.5000 in early Singapore to below 1.4920 while USD/INR slid about 0.8% at the Mumbai open. The Korean won did have some domestic fuel, as the Kospi out-performed (+1.7%) in the wake of the Bank of Korea’s larger than expected 100bp base rate cut, to 3%. USD/KRW sat about 3.5% lower in afternoon [...]

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