Forex Investment and Currency Trading

The three dominant themes in financial markets currently are the flight to liquidity, deleveraging, and the shift of policy makers’ attention from inflation to growth. Even countries that are still facing double-digit inflation, such as the UAE and Saudi Arabia, are more concerned with tightening liquidity right now than with inflation.
These three themes will have implications for the currency markets. The shift of attention from inflation to growth implies that plans to change exchange rates in Gulf Cooperation Council (GCC) countries will be delayed, even if the need for more flexible exchange rates and monetary policy is as strong as [...]

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New issuance in corporate credit markets remains weak, even after improvement in money markets.

Credit standards within the banking system are still tightening, as highlighted by the recent loan officers survey by the Fed and the ECB.
The risk-taking capacity within banks and the investor community has been reduced and is likely to be further reduced in coming months.
We have been in a multi-year process where leverage has been built. This process is now reversing, and it is likely to have some inertia, especially now that it has an additional catalyst from pronounced economic weakness.
While things might have improved somewhat relative to [...]

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The last few months have seen historic volatility in currencies, including one of the biggest Dollar rallies ever. Many of the links between currencies and fundamentals that we normally rely on have broken. This has certainly been the case for the Dollar. The initial Dollar rally during July and early August was arguably consistent the macroeconomic news flow, which saw large negative surprises in economic data outside the US, in particular in the Euro-zone. But the later, and more violent, Dollar rally from mid-August to today has happened against a macroeconomic backdrop that would normally be seen as Dollar-negative.
First, the [...]

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When it comes to the design of regulatory systems, disaster can teach some powerful lessons. California’s building codes are based on that state’s experience with earthquakes. Florida’s standards owe their structure to hurricanes. The same principle holds true in the world of finance, where disasters are usually caused by human beings. Coordinated circuit breakers in the securities and stock index futures markets (as well as many other reforms) are an outgrowth of the October 1987 stock market break. The very existence of an independent CFTC, with jurisdiction over futures trading in all commodities, owes a great deal to the early [...]

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USD Repatriation remains a support for the USD even as USD funding pressures have improved. But a weak economy and declining stock prices are not a solid foundation for any currency over time.
EUR Global risk reduction continues to weigh heavily on the EUR; recent trading performance suggests EUR/JPY more related to US equity performance than USD/JPY, which is unlikely to persist into 2009.
JPY While the JPY remains vulnerable to risk developments, easing global financial market tensions suggest better risk appetite and some downside for the JPY. Maintain long AUD/JPY position.
GBP EUR/GBP has enjoyed a sharp gain of yield support in [...]

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