Forex Investment and Currency Trading

There are increasing signs that the combination of the strong EUR, sharply higher energy prices, cumulative ECB tightening and weakening global growth are weighing heavily on Euro zone growth, with a risk of no ECB rate hike this year.
At the same time, expectations for US growth and interest rate hikes have adjusted sharply lower, suggesting limited further downside for the USD.
Accordingly, it is time to structure exposure for a gradual, but significant, decline in EUR/USD during the years ahead, and recommend establishing core short EUR/USD at 1.5920, targeting the January 22 low of 1.4365 with a two-day stop above 1.6250.
It appears [...]

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A Cross Currency Swap, or CCS, is an agreement between two parties to exchange both principal and interest cash flows denominated in different currencies. In its most common form, the Cross Currency Swap is based on floating rate flows in one (non-USD) currency against floating rate (i.e. LIBOR) payments in USD, but many other structures and currencies are possible. Usually, the principal amounts in each currency are exchanged at the start and end of the transaction.
Cross Currency Swap are typically used to take advantage of advantageous borrowing opportunities in different credit markets, particularly where a borrower faces differences in funding [...]

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The interrelationship between CAD, USD and oil is clearly evident through the impact of oil on trade balances. Presently, developments that are bullish for oil prices are bearish USD/CAD.
However, the rally in oil prices (44% YTD) and by extension overall energy prices obscured that Canadian and US non-energy trade balances are behaving as one would expect given lengthy periods of CAD strength and USD weakness. This will prove to be USD/CAD bullish in the medium-term.

Fed Chairman Bernanke’s comment this week about the upside risk to US inflation from USD weakness sparked a USD rally, and sharp sell offs in oil [...]

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Figure 1 traces notable Asian currency reactions to the depreciation of Vietnamese Dong (VND) against USD in the second half of 05/2008. Although market does not expect a generalized Asian currency crisis à la 1997, the short-run market jitters are apparent in the increased implied volatilities of USD/PHP & USD/IDR. Near term, corporates may find hedging these currencies more expensive, until the market can fully digest the significant VND depreciation and return to its trend. This is apparently already occurring with USD/PHP, as implied volatility has started to decrease since its
high on 05/28/2008.
Figure 2 reflects quarterly rolling correlations of daily [...]

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