Forex Investment and Currency Trading

Some market opinion is that monetary policy will remain one of the key factors for the Dollar and more aggressive QE by the Fed will weigh on the Dollar.
Given the initial imbalances were bigger in the US, that the pace of contraction in Q4 and Q1 was faster than in most other countries, and given that the Fed has a history of more activist monetary policy than most other central banks, a comparatively more accommodative stance by the Fed will likely remain in place. This is the core scenario for the next 6 to 12 months and generally reflected in [...]

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Much at the activity that we’ve lately has been interest in selling USD on the left hand side. Both corporates and hedge funds are looking for ways to put money to work. This activity would most likely be incite risk on trades and weaken the USD. The activity has been very visible in non-Japan Asia where USDKRW and USDTWD traded down to levels not seen recently. The TWD was largely influenced by laws permitting greater cross-strait relations and investments. We’re also seeing stabilization in Japan as March production came in stronger than expected. Inventory ratios also corrected for the fist [...]

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Over the past few months, the fundamental drivers of currencies have taken a back seat to a range of influences which have fallen out from the global recession. The recent drivers of currencies have tended to be risk, liquidity and an assessment of policy vibrancy (this includes aggressiveness of rate cuts, fiscal stimulus and more recently, quantitative easing).
Gone from most currency equations, at least for the time being, are the broad fundamental drivers such as relative economic growth, carry, current account balances, inflation differentials and commodity prices. If these were important, the USD and JPY would be very weak and [...]

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Questions:

How can I take advantage of an expected currency move without having to bother about exchange controls?
How can I hedge my risk without having to take delivery of currency?

Answer:

Non-delivery forwards or options

A theoretical example:

You think the Korean won will appreciate – current spot 1506.50 bid, 1513.50 offer
You buy KRW 1000 million one-year forward – forward points –40 / -20 = forward outright 1466.5 – 1493.5 – cost = USD 681,895.67
At maturity, spot is 1300-1310
You sell the won spot for dollars and receive USD 763,358.88
Net gain = USD 81,463.11 = net settlement

Since I don’t want to take delivery of [...]

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