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 [...]

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Emerging financial markets frequently track swings in advanced economy stocks. However, the close relationship between Emerging Market (EM) currencies and the S&P 500 broke in October 2007 with virtually no sign of repair since.
In 2H 2008, emerging market currency strategies will likely benefit from adhering to two main tenets
1) pursuit of relative value and 2) timing the Fed’s need to normalize its monetary stance.
The EM trade recommendations have been skewed to relative value or an adherence in long positions, where central banks have the willingness, ability and need to reduce local inflation pressures.
The second factor will likely appear at a [...]

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The USD gained a stunning 5.3% versus the Colombian peso (COP) last Thursday, largely on the heels of remarks by President Uribe that the government is working to stem the gains in the COP and create a more ‘competitive’ peso. The movement of the currency reflects more than Presidential rhetoric and the drop in the S&P alone. The Central Bank moved its originally scheduled monetary policy meeting from this Friday, June 27 to the prior Friday, June 20. At the meeting last Friday, the Central Bank maintained the policy rate at 9.75% relative to mixed expectations regarding the potential for [...]

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South Africa The current account deficit worsened to a 26-year high in the first quarter, while a robust headline financial account balanced masked underlying weakening that increases concerns about financing going forward. The annualized current account deficit rose to 9.0% of GDP, much worse than in Q4 and than expected by the consensus. While manufacturing benefited from the weaker rand, the volume of mining exports dropped by 9% qoq due to power shortages, although rapidly rising commodity prices still allowed an 8% in export value. However, high world energy prices boosted imports even more, by 12% qoq. The financial account [...]

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