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Archive | Interbank Forex Markets

High Yielders Benefit From Rising Risk Appetite

Yen Falls Against Most Majors

The Japanese yen fall against most major currencies on speculation that the bank of Japan will implement further monetary easing measures. Recently the yen has benefited from repatriation flows as Japanese corporations seek to repatriate funds before the end of the fiscal year. Most experts believe the BOJ leans towards monetary easing but disagreement among board members on how to justify such a move remains. A report that showed that Chinese exports gained the most in three years lifted investor risk appetite putting further pressure on the yen. Chinese sales gained 46% in February. Commodity linked currencies gained on the Chinese export data. Greg Anderson of Societe Generale SA stated, “There is a firm underpinning to the global economic recovery. The yen normally weakens when stocks go up and has been reluctant to do so the last few weeks. Now it’s playing catch-up.” The yen fell 1% against the euro to 123.60 and fell 0.7% vs. the US dollar to $1.3646.

Risk Sentiment to Improve say Experts

Better than expected data prompted carry trades where investors use currencies borrowed in nations with low rates to finance the purchase of higher yielding currencies such as the Australian dollar and Brazilian Real. The Chinese data helped the Aussie dollar since Australia is one of the chief suppliers of raw materials to China. Currency experts expect high yielding currencies to continue to perform well. Lee Hardman of Bank of Tokyo Mitsubishi UFJ Ltd stated, “Conditions will continue to improve on the risk-sentiment front, and the emerging-market currencies and commodity-linked currencies are likely to outperform over the coming weeks.”  The Aussie dollar gained 0.6% hitting a seven week high vs. the US dollar and traded at 0.9186,. Analysts at Commerzbank said, “They (Australian and New Zealand dollars) are benefiting from good Chinese data which suggest that the economy there is expanding strongly.” The Kiwi dollar rose to a five week high gaining 0.9% and traded at 0.7087.

Euro Trading Volatile

Euro trading was volatile with gains and losses throughout trading sessions. On Tuesday the euro took a hit after Fitch’s ratings agency said it has a negative outlook for Portugal’s debt rating. A highly successful Portuguese bond sale lifted euro sentiment slightly. The euro was lifted after Greek Prime Minister George Papandreou met with US President Obama and said that Obama expressed support for Greece’s austerity measures. Papandreou told reporters, “We’re not asking for a bailout, we’re not asking for financial help from anyone. What we are doing is first of all revamping our own economy. We are taking measures to put our economy on the right path.”

Quick Forex Tip: Interbank forex dealers have access to better spreads than the average investor because of the size of the transactions. Small investors who want to trade interbank fx now have access through the use of forex brokers who are able to put together large transactions. Additionally, many very wealthy individuals trade interbank fx hoping to profit from currency fluctuations. Whether you have a lot or a little money to invest, interbank forex trading is a great option because forex markets are almost recession proof.

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Bernanke Confirmed-Rates to Remain Low

Bernanke Triumphs Over Opponents

Federal Reserve Chairman Ben Bernanke was confirmed by a senate vote of 70-30 last Thursday. United States President Obama and his allies in the Senate put pressure on several senators to get the 60 vote super majority necessary to defeat Bernanke’s opponents. Democrats supported Bernanke by 47-11 and the Republican vote was 22-18 in favor of confirmation. Many economists and experts have decried the politicization of the Fed which has traditionally been politically neutral and independent. Chris Krueger of Concept Capital stated; “The politically neutral and independent Fed has really been politicized this week, probably to its detriment.” Lawmakers who ultimately supported Bernanke said they were influenced by the original approaches taken by Bernanke to avoid a more serious financial meltdown. Michigan Democrat Carl Levin, said; “Chairman Bernanke’s performance in addressing the economic crisis and his current efforts to significantly enhance financial regulation to help prevent future crises outweigh his past mistakes.”

Exit Strategy Bernanke’s Biggest Task

Bernanke’s biggest task will be to decide when to dismantle the emergency measures used to address the financial crisis. For the past few months speculation has been rampant on when the Fed will raise interest rates. Every piece of positive US data has prompted speculation of a rate increase. Last Wednesday after a two day meeting the Fed announced that interest rates would remain “exceptionally low” for “an extended period.” Public anger over expensive bank bailouts has dominated the political landscape running up to the mid term 2010 elections. Public anger could lead to legislation which would strip the Federal Reserve of its supervisory role over banks and its consumer protection responsibilities.

Fed to Remain Independent

Investors, including foreign investors had worried that Bernanke’s confirmation difficulties could lead to increased congressional meddling in central bank decisions and monetary policy. Financial markets including currency markets were relieved by Bernanke’s confirmation believing that the confirmation limits congressional leverage over the Fed and its decisions. Dan Fuss of Loomis Sayles in Boston expressed the view of many when he said; “You trust the central bank or you don’t. This confirmation takes that uncertainty away for many.”

Congress May Curb Fed’s Power

Bernanke supporters and opponents voiced concerns. Senator Christopher Dodd, a Bernanke supported has criticized the Fed for lax oversight of banks. Dodd stated; “If I had been voting solely on the performance in ‘07, I would have voted against him.” Dodd and Senator Richard Shelby of Alabama and a Bernanke opponent want to strip the Fed of its supervisory power over banks. Shelby stated, “We should seriously consider, and we’re talking about, taking the regulatory power away from the Fed, let them concentrate on monetary policy. There’s a lot of unrest in the country, and a lot of people do not believe that the Fed should have been the central intervener in too-big-to-fail” financial firms.”

Quick Forex Tip: Interbank forex trading determines pricing in all levels of currency markets. Spreads available to interbank traders are sharp and unavailable to outsiders. Interbank traders who can guarantee a large number of transactions for large amounts can demand a smaller spread between the bid and ask price. Unfortunately these same spreads are not available to the average investor making relatively small transactions. Thus, for the average investor to participate in interbank forex trading, s/he must do so through the use of a broker.

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Euro at Four Month Low vs. Pound

Rising Home Prices Boost Pound

The euro remains under pressure and hit a four month low against the pound on Monday. The pound traded below 88 pence per euro after a survey showed that UK house prices increased in January. Home prices in England and Wales rose 0.4% in January. Mitul Kotecha of Calyon, the investment-banking unit of Credit Agricole SA stated, “Data such as house prices and consumer sentiment are showing some signs of improvement. The pound is among our favorite currencies this year. A lot of negative news has already been in the price.” Economists believe that the UK’s economy is showing signs of recovery. The Bank of England cut its key interest rate to a record low of 0.5% and engaged in an a 200 billion pound asset purchase program. The pound also gained on speculation that US based Kraft Foods will increase its bid for Cadbury showing that demand for UK assets is growing.

Greece Casting Shadow on Euro

EU finance ministers met today to discuss the Greek fiscal crisis. Most believe the finance ministers are running out of patience with the Athens government and that the finance ministers have been repeatedly misled by the Greek government about the size of the nation’s budget deficits. Greek fiscal concerns have pressured the euro during recent trading sessions. Rob Minikin of Standard Chartered in London said, “The Greek developments are definitely casting a shadow on the euro. It underlines how a strong euro could compound problems in the region, and reinvigorates the argument for a weaker euro.” The euro weakened broadly last week after the European Commission said that there were “severe irregularities” in the economic data Greece used to calculate its deficit.

Bank of Japan to Maintain Current Policies

The yen fall against most of the 16 most traded currencies after Masaaki Shirakawa, Governor of the Bank of Japan said the central bank will continue its deflation fighting policies. Addressing a quarterly meeting of regional branch managers Shirakawa said, “The central bank is aiming to maintain an extremely accommodative financial environment.”

Quick Forex Tip: Interbank fx trading determines pricing in all levels of currency markets. Spreads available to interbank traders are sharp and unavailable to outsiders. Interbank traders who can guarantee a large number of transactions for large amounts can demand a smaller spread between the bid and ask price. Unfortunately these same spreads are not available to the average investor making relatively small transactions. Thus, for the average investor to participate in interbank fx trading, s/he must do so through the use of a broker.

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Aussie, Kiwi Gain on Rate Speculation

Narrower Trade Deficit Pressures Dollar

The US dollar declined for the second day in a row vs. the euro as a narrower-than-expected U.S. trade deficit for October and much improved jobless claims doused demand for safe haven assets. The Euro’s gains were capped by investor concerns about the fiscal health of both Greece and Spain. On Wednesday Standard & Poor’s said Spain’s credit outlook is negative. On Tuesday Fitch cut Greece’s rating sparking debt concerns. Jacob Oubina of Forex .com stated, “The continuing claims rolled off quite a bit, and they came in about almost 300,000 below what the market was looking for. And the trade balance in the U.S. also improved considerably. A positive for the risk trade.” Against the dollar the euro was up 0.2% at $1.4758 and against the yen the dollar gained 0.3% trading at 88.45 yen.

Greek Concerns Will Not Split Euro Zone

ECB Governing Council member Ewald Nowotny said that worries about Greek finances would not split the Euro Zone. Johan Javeus of SEB in Stockholm said about the Greek situation, “The euro has probably taken a bit of a hit from these internal problems in the euro zone.”

Aussie Jobs Data Fuels Rate Speculation

Positive Australian jobs data fueled speculation that Australia’s central bank would raise rates. Earlier in the week the Reserve Bank of New Zealand said that New Zealand may raise rates sooner than anticipated. The Australian dollar gained 0.8% vs. the greenback trading at $0.9158 and the Kiwi dollar rose 1.2% to $0.7272. Some currency analysts speculated that markets may be changing from the recent trends of trading on risk sentiment to trading on fundamentals. You-Na Park of Commerzbank stated, “Interest rates are becoming a more important factor and the market is looking more at fundamentals now.”

BOE to Hold Rates Steady

The pound was up 0.4% against the dollar trading at $1.6316 and against the euro rose 0.3% to 90.26 pence. Earlier the Bank of England said they would hold rates at record lows of 0.5%.

Quick Forex Tip: Interbank forex trading determines pricing in all levels of currency markets. Spreads available to interbank traders are sharp and unavailable to outsiders. Interbank traders who can guarantee a large number of transactions for large amounts can demand a smaller spread between the bid and ask price. Unfortunately these same spreads are not available to the average investor making relatively small transactions. Thus, for the average investor to participate in interbank forex trading, s/he must do so through the use of a broker.

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Interbank Rates at Record Low

Interbank Rates Hit Record Lows

Interbank lending rates hit a record low on Wednesday (Nov.18) as investors speculated that governments and central banks will keep stimulus programs in place well into 2010. The LIBOR three month dollar rate (London interbank offered rates) fell to 0.26906% while the euro LIBOR rate rose slightly to 0.67500% according to the British Bankers Association. The pound LIBOR fell after minutes from the Bank of England’s meeting showed that the central bank may expand the bank’s quantitative easing programs to 200 million pounds. ($334,815,776 USD) Stephen Lewis of Monument Securities stated, “A reduction in this rate would bear down on short-term market rates, perhaps shaving a few basis points off borrowing costs. Probably wisely, members decided that any easing in monetary conditions achieved by this means would be on a scale unlikely to make much difference to demand in the economy. However, the MPC agreed to keep the remuneration rate under review.”

Fed Will Keep Rates Low

Rates in money markets have hit record lows as record low interest rates and central bank injections of liquidity have combined with policymaker’s promises of the continuation of stimulus programs are keeping rates at record lows. Last week the US Federal Reserve indicated that it would continue to keep interest rates near zero in an attempt to stimulate US economic recovery. In the euro zone there is a continuing debate on how much the ECB will inject in one year funds into a market already flooded with cash.

Dollar Declines Against Major Currencies

On Wednesday the US dollar fell against most major currencies as investors took profits on the dollar’s recent rally and the view that US rates will remain low well into 2010. Many traders say the greenback’s long term fall will continue because although the Federal Reserve has indicated it may withdraw some stimulus measures it is still a long way from raising interest rates. St. Louis Federal Reserve President James Bullard indicated that the Fed will tighten policies by adjusting emergency asset purchasing programs instead of raising interest rates.

Quick Forex Tip: Interbank forex dealers have access to better spreads than the average investor because of the size of the transactions. Small investors who want to trade interbank fx now have access through the use of forex brokers who are able to put together large transactions. Additionally, many very wealthy individuals trade interbank fx hoping to profit from currency fluctuations. Whether you have a lot or a little money to invest, interbank forex trading is a great option because forex markets are almost recession proof.

Posted in Interbank Forex MarketsComments (0)

US GDP Figures Spur Risk Demand

GDP Figures Better Than Predicted

Better than expected US GDP figures subjected the US dollar to the usual downward pressure experienced from a rise in risk sentiment. US GDP rose 3.5% during the third quarter exceeding expectations of 3.3%. Stock markets rose sharply sending currency traders in search of higher yielding currencies. Once again the Aussie and Kiwi dollars were big winners and both gained a full 2% against the US dollar. The Aussie traded at US$0.9146 and has a benchmark rate of 3.5% as opposed to the greenback’s near zero rate. The Kiwi traded at US$0.7342 after rising as high as US$0.7352.

Pound Rallies

The pound continued its rally and climbed above $1.66 the highest against the greenback in almost a week. The pound rose nearly 1.5% trading at $1.6605 against the US dollar. The dollar index or DXY which measures the US dollar against a basket of six major currencies fell 0.6% to 75.947. Despite losses the DXY is on track for a weekly increase of 0.6%. US unemployment claims fell to the lowest level in seven months further boosting risk sentiment among investors.

Recovery Skepticism

Despite the figures some analysts are not fully confident of economic recovery. Boris Schlossberg of GFT stated, “The (jobless claims) figure remains above the 500,000 barrier and until it drops below that level the market will not be fully confident that the recovery has taken hold,” Against the yen the US dollar gained 0.9% trading at 91.41 yen after hitting a session peak of 91.62.

Euro Gains vs. Dollar

Both the US dollar and the yen fell against a basket of 16 major currencies and both stocks and commodities rallied. The euro vs. dollar rate fell almost 1% to $1.4859 finally trading at $1.4827 in late New York trading. During the last four trading sessions the dollar had gained on the euro due to perceptions of a stalled US recovery but the third quarter GDP figures spurred a stock rally and demand for riskier assets across the board.

Quick Forex Tip: Interbank fx trading determines pricing in all levels of currency markets. Spreads available to interbank traders are sharp and unavailable to outsiders. Interbank traders who can guarantee a large number of transactions for large amounts can demand a smaller spread between the bid and ask price. Unfortunately these same spreads are not available to the average investor making relatively small transactions. Thus, for the average investor to participate in interbank fx trading, s/he must do so through the use of a broker.

Posted in Interbank Forex MarketsComments (0)

Aussie May Reach Parity With US Dollar

Aussie Big Winner Again

The Australian dollar has been a recent big winner in forex markets globally. The Aussie dollar has experienced an astounding 32% rally so far this year and some forex traders and currency experts are predicting the Aussie dollar will reach parity with the US dollar for the first time since 1982. Demand for the Aussie has climbed as investors remain concerned about the status of the US dollar as a reserve currency and predictions that US interest rates will remain at record lows. Jonathan Xiong of Mellon Capital in San Francisco stated, “We like the Australian dollar and that’s one of the recovery plays we have on. He further stated that parity is “a possibility, but we don’t make forecasts on whether it will go to parity or a particular rate.”

US Dollar Pulls Back From 14 Month Low

The US dollar pulled back from a 14 month low against the euro as disappointing third quarter results from General Electric and Bank of America triggered a slight rise in risk aversion. Amelia Bourdeau of UBS AG stated, “The rally in the dollar we see today is profit taking going into the weekend. We think risk seeking will continue, although it’s getting choppy.” The dollar vs. euro rate rose 0.4% to $1.4891 after hitting a 14 month low of $1.4968 and against the yen the dollar advanced 0.3% to 90.86 yen. Bourdeau also said she believes that the US dollar’s decline will resume as currency traders and investors seek higher yielding assets.

Aussie Second Best Performing Currency

The Aussie dollar is the second best performing currency after the S African Rand. The Australian economy expanded after one single quarter of economic contraction. Currency experts believe the growing Australian economy will make the Aussie dollar even more attractive against the US dollar which is troubled by massive deficits and is also pressured by the amount of debt the U.S. Treasury will issue. Australian growth has been fueled by a A$20 billion ($18 billion) in government handouts to consumers and China’s demand for the country’s iron ore.

Quick Forex Tip: Interbank FX traders are at the top tier of the global forex market. A majority of all daily transactions in forex markets are conducted by traders from ten large banks. Despite market manipulation by central banks many economists have cited forex markets as closest to the ideal of perfect competition – meaning that no market participant is large enough to set currency prices. As a result, forex trading has become popular with smaller investors because forex markets offer investors the opportunity to profit during troubled times , allowing them to offset losses in other markets.

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The Advantages of Leverage

Forex trading has become incredibly popular during the past decade and the forex market is the world’s largest with approximately 3 trillion dollars traded daily. At one time currency markets were only open to large investors, central banks and large corporations. Online currency trading began in 1994 and has attracted millions of investors to this lucrative market. Forex trading has allowed adept traders to make money during the current global recession. Forex trading offers investment opportunities that equity markets cannot match.

One of the most attractive features of forex trading is the use of leverage. Forex trading is done in standard lots of 100,000 or mini lots of 10,000. To overcome initial capital needs forex brokers began to offer leveraged accounts. A leveraged account is a sort of credit offered by the forex broker and is backed up by the investor’s capital. Leverage allows the investor to control large amounts of money. Forex traders monitor exchange rates in ‘Pips’ which is the smallest variation in currency prices and can be in the second or fourth decimal place in a currency pair’s price.

As an example suppose a currency pair’s price EUR/USD moves from $1.47 to $1.48. The move equals 100 pips or $0.01 change in the exchange rate. These small movements are the reason that transactions must be carried in large amounts and the use of leverage allows these small movements to accumulate into decent profits by the use of leverage. When dealing in lots of 100,000 minute changes can mean significant profits.

Most forex brokers’ offer leveraged accounts ranging from 50:1 to 400:1. Of course higher leverage means higher risk. Most experts recommend that novice forex traders start with low leverage and increase the leverage as they become more familiar with forex trading. Using leverage should be done with caution and used intelligently. Using leverage wisely is one of the keys to success in currency markets.

Quick Forex Tip: The average investor usually participates in the interbank market through a broker who handles funds for a large group of investors. The large amount of money given to the broker gives him access to the favorable spreads available in the interbank market. For small investors there are a huge number of interbank FX reviews available online. These reviews give the average investor the ability to research the positives and negatives of the brokers reviewed. Most interbank FX reviews will detail customer service experiences, reliability and investment track records

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US Will Not Nationalize Banks-Markets Respond

US Will Not Nationalize Banks-Markets Respond

Us to Have 40% Stake in Citibank

Markets have money-graphics-2007_881609aresponded positively to the news that the US will have a 40% stake in Citibank calming fears of total bank nationalization. Interbank forex brokers were pleased with the news and the return to risk appetite. The Japanese Yen fell on Monday and surrendered some of its safe haven status on interbank forex exchanges.

Possible Austrian Credit Downgrade

The news affected both the dollar and the Yen as interbank forex brokers sought out higher yielding currencies. The Euro fell further against the dollar amid concerns about the possible downgrading of Austria’s AAA credit rating. Austria would join several Euro Zone countries with downgraded ratings. The US Federal Reserve Bank and the Treasury said that both agencies stand behind the US banking system.

Yen Pressured By Negative Economic Data

The Japanese Yen fell 1.1% against the Canadian dollar, 0.9% against the Swiss Franc, and 2.7% against the British Pound. The Yen was also pressured by dismal economic data and massive job losses in Japan causing the Yen to surrender some of its safe haven status on interbank forex markets.

Euro Surrenders Gains

The Euro surrendered gains against the US dollar and fell 0.2% to 1.2817. Comments by ECB President Jean-Claude Trichet pointed out the Euro Zone’s banking and economic problems. Interbank forex brokers have seen the Euro fall significantly during the global economic crisis. Interbank Forex brokers are cautious about more dismal news emerging from the Euro Zone and are waiting for the Ifo index on the German economy due on Tuesday.

Weekend Conference Disappointing

Interbank forex brokers were also disappointed with the results of a weekend conference of European leaders which failed to come to any agreement on how to address the ongoing Euro Zone recession. Ulrich Leuchtmann of Commerzbank stated, “There was disappointment that the main focus of the G20 meeting was on financial market regulation, which is not the most important problem at a time of global recession.”

Interbank forex brokers welcome the return to risk appetite which means increased profits for their respective banks and their investors. We can only hope this trend continues.

Quick Forex Tip: The average investor usually participates in the interbank market through a broker who handles funds for a large group of investors. The large amount of money given to the broker gives him access to the favorable spreads available in the interbank market. For small investors there are a huge number of interbank FX reviews available online. These reviews give the average investor the ability to research the positives and negatives of the brokers reviewed. Most interbank FX reviews will detail customer service experiences, reliability and investment track records.

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Yen Rises Despite Japan’s GDP

Yen Edges Higher

The Japanese Yen edged higher Monday after the weekend meeting of the G7 made no specific reference to the Yen’s strength on currency markets. Interbank forex brokers had been watching the meeting closely and many indicated that currency markets will take their cue from Equity markets. Interbank Forex markets had been concerned about possible intervention by the Japanese government.

Risk Aversion Pushing Yen Higher

The Yen rose in spite of bad economic news for Japan. Japan’s economy declined in the last three months of 2008 but the contraction was within expected ranges. Increasing risk aversion also helped to push the Yen higher on interbank forex markets. Interbank forex brokers often use the Yen as a gauge for risk aversion in currency markets. Yuji Saito of Societe Generale had this to say about the Yen, “Without a (G7) mention of the yen’s strength, caution on Japan’s intervention in the currency market eased and as a result the dollar’s gains were capped against the yen.”  Japan’s GDP declined by 3.3% in the last three months of 2008, its sharpest decline since the oil crisis in the early 70’s.

Pound Falls vs. Dollar and Euro

The Pound got pounded again against the US dollar and the Euro after the G7 meeting failed to address the Pound’s weakness. The Pound fell 0.78% against the dollar to $1.4242. The Euro traded at 89.80 pence, a 0.2% rise.  Interbank forex brokers were hoping the conference would address currency issues but the global economic crisis dominated the meeting. Interbank forex brokers have also been watching situations in Ireland and Eastern Europe that could increase the risk of sovereign defaults.

European Banks Put Pressure on Euro

Yuji Saito of Societe Generale said, “In addition to the weak GDP report in the euro zone, worries about losses among banks in Europe ahead of the earnings season are expected to emerge, which would put downward pressure on the euro.” Also of interest to Forex markets is a statement that indicated the G7 group would address any wild market swings. The statement released by the group said, “Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We continue to monitor exchange rate markets closely, and cooperate as appropriate.”

US Markets and Banks Closed Monday

US interbank forex markets are closed today for the Presidents Day holiday. Obama is set to sign the historic stimulus bill in Denver on Tuesday. Hopefully the effects will be felt quickly on interbank forex markets.

Quick Forex Tip: Interbank forex trading determines pricing in all levels of currency markets. Spreads available to interbank traders are sharp and unavailable to outsiders. Interbank traders who can guarantee a large number of transactions for large amounts can demand a smaller spread between the bid and ask price. Unfortunately these same spreads are not available to the average investor making relatively small transactions. Thus, for the average investor to participate in interbank forex trading, s/he must do so through the use of a broker.

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