One of the pitfalls of forex blogging (or all financial reporting for that matter) is that it’s inherently after-the fact. In other words, any information about the past – while relevant – is inherently useless, since it has theoretically already been priced into the asset (or currency in this case). Before I begin my post on the Pound’s recent decline and the factors that wrought it, then, I wanted to offer the caveat... 

Since most emerging market economies and financial markets are fairly small, their currencies are subject to the whims of international investors, moreso than is the case with major currencies. For that reason, when I research emerging market currencies as a whole, I often like to focus on what investors are saying are saying about their stocks and bonds. According to one columnist , “For an asset class once considered a snake pit of risk,... 

It’s still anyone’s guess as to if and when China will allow the Yuan (RMB) to continue appreciating. You can see from the chart below – which shows the trading history for the RMB/USD December 2010 futures contract – that expectations of revaluation have eroded steadily since December 2009. At that time, it was projected that that Yuan would finish 2009 at 6.57 RMB/USD, 4% higher than the current level. Fast forward... 

The Wall Street Journal’s coverage of the Greek dent crisis has focused less on the crisis itself, and more on the markets’ reaction to it. With headlines like “ Hedge Funds Try ‘Career Trade’ Against Euro ” and “ Speculators Bet Record Amount Against Euro For 4th Week ” and “ Europe Trouble, U.S. Opportunity ” – among others – the WSJ has identified a collapse in the Euro... 

With this post, I want to try to clarify the Greek fiscal crisis. The problem is that it’s not clear exactly how serious the problem is, because most of the media coverage of the crisis has been directed towards the financial markets’ perception of it, rather than its underlying fundamentals. In the end, I think it’s important to understand both. The Financial Times published a great timeline that shows perception and reality... 

Last week, the Fed raised the discount rate by 25 basis points, to .75%. Investors have consistently focused the brunt of their collective monetary attention on the Federal Funds Rate, and the markets (forex included) barely registered a response to the move. Regardless of whether apathy in this particular context was justified, investors who turn a blind eye to changes in Fed monetary…  Read More →

By now, most investors are well aware of the acronym BRIC , which stands for the emerging market powerhouses of Brazil / Russia / India / China. When the idea was conceived in 2003, it seemed to make a lot of sense, as these four economies were at the top of the GDP ‘league tables,’ year-after-year. While China, India, and to a lesser-extent, Brazil, all continue to outperform, Russia has begun to lag. Perhaps Russia needs to be... 

Since the emergence of the debt crisis in Greece, UK policymakers have been once again patting themselves on the back for not joining the Euro. Otherwise, they would currently be in the same awkward position as France and Germany, whose economic might underpins the entire Eurozone and are wondering about if and how they should lend their support to Greece. Given that the Pound has fallen at an even faster clip than the Euro in recent weeks,... 

In January, the Canadian Dollar (aka Loonie) registered its worst monthly performance since June. Many analysts pointed to this as proof that its run was over, after coming tantalizingly close to parity. Others insisted that the decline was only a temporary correction, a mere squaring of positions before the Loonie’s next big run. Who’s right? Both ! There are (at least) two separate narratives presently weighing on the Loonie. The first... 

Currency markets operate in funny ways. Greece’s fiscal problems are hardly a new development. During years of boom and bust alike, it ran unsustainable budget deficits. Why investors have decided to fret now – as opposed to last year or next year, for example – on the distant possibility of default, is somewhat mysterious. After all, the credit crisis exploded in 2008, and conditions now are inarguably more stable than they... 

Last month, I reported on how anticipation is (was) building towards a revaluation of the Chinese Yuan (RMB), confidently stating that “The only questions are when , how and to what extent .” While I’m not ready to recant that prediction just yet, I may have to temper it somewhat. On the one hand, the case for RMB revaluation is stronger…  Read More →

In December, I posted about Ben Bernanke ( Bernanke’s Background and Near-Term US Monetary Policy ), specifically about how a basic understanding of Bernanke’s academic background and philosophical approach to monetary policy could be useful for predicting the general direction of interest rates, irrespective of prevailing economic conditions. This post, is somewhere between a follow-up and a step back. By this, I mean that when I last... 

Kudos to anyone who correctly identifies that reference. But seriously, in light of the proposed changes in forex regulation that have generated a heated response on this blog and elsewhere, I want to offer some insight into a tangential issue: jurisdiction. Part of the problem with existing forex regulation is not that it’s insufficiently strict, but rather that it’s essentially optional. That’s because retail forex brokerages... 

In 2009, so-called commodity currencies – both individually and as a group – registered record-breaking gains. The Brazilian Real and the South African Rand finished up more than 30%, while the Australian and New Zealand Dollars finished up about 25% each, and the Canadian Dollar not far behind. While the outlook for 2010 is slightly less rosy (if only because of the law of averages), investors would still be wise to keep such currencies... 

In October, I wrote about a “ separation ” that had taken place in currency markets between the “sick” currencies and the “healthy” currencies. At the time, I argued that the former category was comprised mainly of the Dollar and the Pound, with most other currencies healthy by comparison. While I still stand by this paradigm, I would like to revise it slightly. Specifically, I would like to add the Euro and...