Forex Investment and Currency Trading

USD-CNY
The central parity fixing was set this morning at 6.8287, with spot currently trading around 6.8258. There seems to be a clear bias to maintain as much stability as possible in USD-CNY spot while the global market turbulence continues around it. USD-CNY non-deliverable forwards which had rallied particularly at the longer end retreated this morning, trading around 7.00 in the 1Y. Further market concerns about China‟s growth prospects could still open the way for a test of 7.10. Medium-term there will be some rises in USD-CNY. This week sees the release of the September trade figures, money supply and wholesale [...]

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Last week’s depreciation and volatility of the Mexican peso was of a scale not seen since the onset of the crisis of 1994-1995. After closing on October 7 at 12.3363 per U.S. dollar, the peso plunged to an intra-day low of 14.314 on October. Historical data on intra-day movements is not available, but if
the intra-day low had been the closing level then this would have been its largest daily depreciation since December 22, 1994. Of course, the rate of 14.314 also represents a record low for the peso. Before last week, the record closing low had been 11.665 on May 10, 2004.
Last [...]

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1 – 3 Month Outlook – USD/ZAR at 8.80 at year-end

Global financial contagion has hit the ZAR hard, with USD/ZAR spiking up to 9.00 and beyond. The net move, from a recent low of 7.22 in early July, is almost certainly an over reaction in the near term, but it does highlight the extreme volatility of holding what many regard as one of the benchmark emerging market currencies. To a certain extent much of the bad news is discounted at least as far as the next few months are concerned. Weaker commodity prices, a further spike in inflation and a [...]

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1 – 3 Month Outlook – Shifting Priorities

The pace of USD/CNY depreciation – both realised and NDF implied – has continued to moderate. The three month annualised rate of USD/CNY depreciation fell to just 1.0% in late-September, down from 6.6% a month earlier and a peak of close to 17% in March. Similarly, 12 month NDF’s have retreated towards the spot rate, when in March they were anticipating a 12% appreciation. In part, the slowing pace of CNY appreciation reflects shifting priorities on the part of the Chinese authorities as inflation has retreated and
evidence of slowing growth continues to accumulate.
However, [...]

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Four stages to the dollar
There have been four stages to the strong recovery of the U.S. dollar in the last few weeks.

Signs of weakness in the European economy
Risk aversion – which resulted in an unwinding of short U.S. dollar positions
Counterparty risk – more recently when borrowers found it increasingly difficult to rollover U.S. dollar and were forced to sell currency to obtain the necessary dollars.
Panic sales of foreign currency/purchases of U.S. dollars – which is perhaps the best description of this week.

The first stage was largely irrelevant for Mexico. This was far from the case, however, with the second stage [...]

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