What sets the international currency trading market apart from other markets is its size, liquidity and the use of large amounts of leverage. Most International Currency Trading is conducted electronically making it especially well suited for day traders and small investors. International Currency Trading was once the exclusive domain of large banks and very wealthy individuals but now the average investor has access to this dynamic market. There are several levels of access to International Currency Trading markets. At the very top is the interbank market which is composed of large banks and central banks. The interbank market accounts for 53% of all currency transactions. At the bottom are retail forex brokers who facilitate currency transactions for small investors.
Retail brokers are a rapidly growing sector of the International Currency Trading market. Reputable brokers in the US are usually members of the National Futures Association, a self regulatory organization and are regulated by the Commodity Futures Trading Commission. In 2009 stricter capitalization requirements were imposed on retail forex brokers eliminating marginal brokers and protecting investors. Most brokers will provide new investors with training programs and demo accounts. International Currency Trading requires a great deal of education and training. Investors need to learn all of the factors that can influence currency exchange rates. Currency markets can be volatile and exchange rates can change several times in one day.
The International Currency Trading market has no central exchange like stock and commodities markets. Currency markets are dispersed throughout the world and the primary trading centers are, in order of importance, London, New York and Tokyo. The geographic dispersal means that markets are always open somewhere in the world and traders can jump on the internet and hopefully make very profitable trades.
]]>Most forex brokers offer those interested in e currency trading training courses and demo accounts. Demo accounts allow new traders to trade in real time without risking actual funds. Many experts recommend that new traders use a demo account until they feel comfortable and confident trading. Most brokers will provide their own software trading platform that the new trader will download. In addition there are several trading platforms available for free on the internet. Most trading platforms offer access to a wide selection of currency pairs. Many brokers also offer data feeds providing investors with the latest market quotes from around the world.
Forex markets provide investors with the use of large amounts of leverage. Leverage can work to the advantage or disadvantage of any trader. The use of leverage allows the investor to control a large block of currency for a small investment. For example if a trader invests $1,000 using leverage of 100:1 he or she will control a block of currency worth $100,000. Since currency moves are measured in ‘pips’ which is the smallest unit that a currency can move the use of leverage is necessary to make a decent profit. Leverage can lead to huge profits but it can also lead to huge losses for the trader.
Investors interested in e currency trading need to educate themselves about the factors that can influence currency movements. Factors influencing currency moves include economic data, political developments and market psychology. Savvy investors know how to interpret current events and how they will influence currency markets. For example bad economic news can prompt a flight to safe haven currencies. (The US dollar and the Japanese Yen) In other words investors park their funds in safe haven assets and hope things will improve.
E currency trading is steadily growing and more investors are joining the exciting world of e currency trading every day.
]]>Selecting a reputable forex broker is not difficult thanks to broker reviews and forex forums on the internet. Although some review sites and blogs may be operated by an individual forex broker for their own benefit these are relatively easy to spot. There are lists of individual forex broker available on the net making it easy for new traders to compare forex brokers. Broker review sites contain the real life experiences of traders who have worked with individual forex brokers and can be a very valuable source of information. There are several factors that new traders should look for when selecting a forex broker.
Security is a prime consideration. Traders should check the reliability and track record of any forex broker they are considering. Reputable forex brokers are members of the National Futures Association, a self regulatory body and their purpose as stated on their website is to; “safeguard market integrity, protect investors and help our Members meet their regulatory responsibilities.” In the US forex brokers are regulated by the Commodity Futures Trading Commission. Recent regulations implemented in 2009 have put most marginal forex brokers out of business.
Init5ial deposit requirements vary from broker to broker. It is not difficult to find a forex broker with affordable deposit requirements. New traders should only risk what they can afford initially. Spreads are also an important consideration. Most forex brokers make money by widening the bid-ask spread beyond the quoted values in the wholesale interbank market which means less money for the investor. It should be no problem finding a forex broker that offers competitive spreads.
Deposits and withdrawal policies should also be considered. There is simply no excuse for unnecessary delays in processing withdrawals so it is a good idea to check each broker’s deposit and withdrawal policies. Leverage offered should also be taken into consideration. It is essential that new traders understand leverage which while it can lead to huge profits can also lead to large losses.
There are hundreds, if not thousands, of reputable forex brokers offering investors their services. Thanks to industry competition new forex traders should have no trouble finding a forex broker that suits their needs.
]]>The US dollar fell against the euro and yen after the Federal Reserve sang the same old song of keeping rates ‘exceptionally low’ for an ‘extended period.’ Only one Fed chief dissented, Kansas City Fed President Thomas Hoenig was the lone vote against current policies. Currency expert Kathy Lien of GFT in New York stated, “Going into the Fed meeting, traders were looking for two things: the inclusion of ‘extended period’ and the number of dissenters. Once forex traders saw the words reappear in the statement and saw that Hoenig was the only dissenter, they bailed out of dollars, “The euro gained 0.7% and last traded at $1.3777. The euro started to gain in early trading after EU finance ministers supported plans to aid Greece if warranted. Standard & Poor’s ended its review of a possible Greek downgrade
The Fed was less than upbeat about recent US housing and employment figures which put the dollar under pressure in currency markets. A recent rise in risk sentiment has also pushed the dollar down. Greg Salvaggio of Tempus Consulting said, “I don’t think the market expected them to say housing is still at depressed levels and employers are still reluctant to add to payrolls. We’re not expecting the euro to break out of its $1.35-$1.38 range on the back of this.”
The Obama administration is facing increased congressional pressure to adopt a tough stance with China regarding its currency policies. On Monday Chinese Premier Wen Jiabao denied China is undervaluing its currency to gain unfair trade advantages. In a letter to U.S. Treasury Secretary Timothy Geithner and Commerce Secretary Gary Locke 130 US legislators said, “The impact of China’s currency manipulation on the U.S. economy cannot be overstated. Maintaining its currency at a devalued exchange rate provides a subsidy to Chinese companies and unfairly disadvantages foreign competitors.” Some currency experts called the move counterproductive. Nick Bennenbroek of Wells Fargo stated, “When China gets international pressure to adjust its currency policy, it seems to resist that pressure. It doesn’t like to be pushed around.” Several economists believe China’s currency is undervalued by as much as 40% giving the industrial giant a large trade advantage. Chinese Premier Wen Jiabao dismissed the complaints and also blamed Washington for the deterioration of relations between the two countries citing the recent meeting of Obama and the Dalai Lama. Democratic Representative Michael Michaud stated, “If the administration fails to act on this issue it will hold back our economic recovery and hurt the ability of American small businesses and manufacturers to increase their production, keep their doors open, and create jobs.”
Quick Forex Tip: Most forex brokers offer those interested in e currency trading training courses and demo accounts. Demo accounts allow new traders to trade in real time without risking actual funds. Many experts recommend that new traders use a demo account until they feel comfortable and confident trading. These trading platforms are available from most brokers. Additionally, there are several trading platforms available for free on the internet, offering access to a wide selection of currency pairs.
]]>The dollar fell broadly against most currencies after the Fed’s beige book report showed that the US economy still faces significant challenges. Although the report showed some improvement the US economy Fed rates are likely to remain low for an extended period. Kathy Lien of GFT Forex stated, “The U.S. economy is chugging along, albeit at a slow pace, and that means the Federal Reserve has no real urgency to raise interest rates.” The ICE Dollar Index was down from 77.011 at 76.875.
The euro fell 0.2% to $1.4477 down from $1.4510 on Wednesday. European Central Bank President Jean-Claude Trichet said that the outlook for the euro zone is uncertain and that Greece’s economic problems would not receive special treatment. Greece’s fiscal problems have pressured the euro in recent trading sessions. The government of Greek Prime Minister George Papandreou approved a plan to reduce the country’s deficit below the European Union’s budget limit in 2012. Trichet said that, “no government, no state can expect special treatment.” The ECB left rates at 1% which most analysts had expected. Trichet’s remarks have led many experts to believe that Greece can expect no help from the EU. German Chancellor Angela Merkel questioned the fiscal policies of other EU nations. In an interview with the German newspaper Die Welt Merkel said, “The Greek example can put us under great, great pressures,” she said, according to the transcript. “Who will tell the Greek parliament to please go ahead and pass a pension reform? I don’t know that they’ll be enthusiastic about Germany giving them instructions.”
The Aussie rose broadly after the Australian statistics bureau reported that Australian employers added 35,200 jobs in December. Most traders predict that the Reserve Bank of Australia will raise its present rate of 3.75 by a quarter of a percentage point.
Quick Forex Tip: The International Currency Trading market has no central exchange like stock and commodities markets. Currency markets are dispersed throughout the world and the primary trading centers are, in order of importance, London, New York and Tokyo. The geographic dispersal means that markets are always open somewhere in the world and traders can jump on the internet and hopefully make very profitable trades at any time of the day.
]]>The pound gained on the dollar and reached a ten day high of $1.6154 in thin year end trading. Year end position adjustments led to a broad dollar sell off benefiting the pound. Sterling declined against the euro which has been the chief beneficiary of the widespread dollar sell off. The exaggerated price movements were blamed on thin trading in currency markets. Geoffrey Yu of UBS stated, “This is just year-end trades. Trade is so thin it only takes a few orders to go through to cause a big movement.” The pound gained 0.4% vs. the dollar trading at $1.6131 and against the euro the pound last traded at 89.27 pence, a gain of 0.1%.
Investors received encouragement from a Bank of England quarterly survey that showed that British financial institutions intend to make credit more easily available to households and businesses during the first quarter of 2010. Pound sentiment remains broadly negative due to concerns about massive UK deficits and an underperforming UK economy. Low Bank of England rates have also pressured the currency. Neil Mellor of Bank of New York Mellon said, “Fiscal concerns are one reason people are starting to get worried about sterling, and if you believe UK interest rates are going nowhere for some time it doesn’t look good for the pound.”
Many currency analysts said that today’s movements had little meaning due to thin trading and there is disagreement whether the dollar’s recent rally is sustainable. The dollar has rallied on recent improved US economic data and speculation that the Fed will raise rates and withdraw stimulus measures. Lee Hardman of Bank of Tokyo-Mitsubishi UFJ stated, “We could some a partial retracement of December’s sharp dollar rally early in 2010, but ultimately further improved U.S. economic data will fuel Fed tightening expectations and support the dollar.” Most markets will be closed over the weekend and Japanese markets will reopen January 4th.
Quick Forex Tip: Selecting a reputable forex broker has been made easy thanks to broker reviews and forex forums on the internet. There are lists of individual forex broker available on the net making it easy for new traders to compare forex brokers. Broker review sites contain the real life experiences of traders who have worked with individual forex brokers and can be a very valuable source of information.
]]>According to many experts the US dollar is likely to extend its recent gains into next week. The dollar has been supported by evidence of a stable recovery in the US and the Fed’s willingness to withdraw emergency measures in February 2010. Despite the Feds announcement that rates would remain at record lows both factors are contributing to speculation that the Fed may raise rates earlier than expected. Nick of Wells Fargo stated, “We see the U.S. economy continuing to recover and monetary policy settings starting to move back to normal. Although our economics team does not expect actual rate tightening to take place until late in 2010, the withdrawal of non-conventional measures could start tipping the scales in the dollar’s favor.” Assets such as stocks, commodities and emerging currencies that have gained over the course of the year have led to year end profit taking benefiting the dollar.
The ICE futures’ dollar index .DXY which measures the dollar vs. a basket of six major currencies has gained since early December but is still down 4.3% for the year. The DXY has fallen 13% since March 2009. For the week the DXY is up 1.9% the best weekly performance since April. The euro was down 2.4% against the dollar this week and on Friday the euro fell to $1.4269 the lowest since September. The euro has been pressured by the Greek downgrade by Standard and Poor’s and Austrian banking concerns. Todd Elmer of CitiFX stated, “The euro is feeling the ill-effects of ongoing strains in Greece and we doubt that this euro-negative factor will soon abate.”
This week will bring a slew of economic data from the US. The final estimate for third quarter gross domestic product will be released along with housing data, reports on personal income and spending, and durable goods orders. Most economists expect the figures to support the view that the US is on the road to recovery. All this is expected to be dollar positive.
Quick Forex Tip: The International Currency Trading market has no central exchange like stock and commodities markets. Currency markets are dispersed throughout the world and the primary trading centers are, in order of importance, London, New York and Tokyo. The geographic dispersal means that markets are always open somewhere in the world and traders can jump on the internet and hopefully make very profitable trades at any time of the day.
]]>The US dollar has retreated from a five week high after remarks by Fed Chairman Ben Bernanke who said that the US economy is still fragile and that unemployment is likely to remain high. He also dampened speculation that the Fed would raise rates on recent improvements in US employment figures. Last week’s non farm payrolls report showed that 11,000 US jobs were lost in November instead of the 130,000 that had been predicted. Brian Dolan of Forex .com had this to say about Bernanke’s remarks, “Bernanke is emphasizing the weakness and the downside to the U.S. economy. Therefore, he’s postponing interest rate hike expectations. He left a very clear impression that rates will remain on hold.”
The euro declined against the dollar after data showed that German industrial output fell an unexpected 1.8% in October. The euro was also pressured by news that Fitch’s rating agency had lowered Greece’s rating from A- to BBB+. A Standard and Poor’s report said that Greece’s banks are Europe’s riskiest. Dubai debt fears lingered after a report said that Dubai World could no expect significant government support. James Hughes of CMC Markets said, “While you’ve got weak data coming out and doubts about Greece and Dubai you will get fickle markets ruled by fear.” Moody’s downgraded six Dubai-linked issuers after concluding that the company could expect no ‘meaningful’ support from the Dubai government.
A drop in US and European stocks sent the US dollar to a near one month high against the euro. The greenback posted its biggest gain since June after US job figures showed that US employers cut fewer jobs since the global recession began. Vassili Serebriakov of Wells Fargo stated, “We’ve seen this equity-dollar correlation reinstalled. The key to breaking the correlation is consistently improving U.S. data shifting interest-rate expectations, and outside of payrolls we haven’t really seen that.” High yielders like the Aussie and Kiwi dollars remain relatively unchanged in advance of a speech from Reserve Bank of Australia Governor Glenn Stevens.
Quick Forex Tip: Currency trading in the UK is heavily influenced by the interbank market. Currency trading UK is regulated by the FSA. Regulation is much lighter in the UK and there is often very little difference between a regulated and unregulated broker. Outside the US, most regulatory bodies addressing currency transactions provide little or no requirements for brokers and regulation is nominal at best. Despite the criticisms of the FSA they do provide a measure of consumer protection and most reputable UK forex brokers are regulated by the FSA.
]]>Many currency experts expect the US dollar to resume its long term decline against other major currencies. The easing of Dubai World fears among investors and financial institutions and an unexpected rise in U.S. pending home resales has spurred a rise in risk sentiment in stock and currency markets. On Tuesday the dollar fell against the euro for the second straight day and the Canadian dollar rose as record gold prices and rising oil prices pushed the commodity linked currency higher. Raw material exports account for more than half of Canada’s export revenues. Amelia Bourdeau of UBS AG stated, “It’s more the type of risk seeking we saw in September and October. There are investors who want to close out these risk-seeking positions and investors who want to get in. So they wait for that pullback and get in.”
The US dollar experienced its fifth straight monthly drop and fell 1.9% in November. The British pound extended gains made against the dollar on Tuesday and traded at $1.6620 after hitting $1.6647 on Tuesday. Bank of England chief economist Spencer Dale said that the UK appeared to be exiting the recession but cautioned that credit is likely to remain tight. Traders and investors are sitting on the sidelines in advance of the European Central Bank meeting on Thursday. Both groups are also waiting for US non farm payroll figures due Friday.
The Japanese yen declined due to a rise in risk appetite and concerns about possible actions by the Bank of Japan. After an emergency meeting on Tuesday the Bank of Japan said it would provide 10 trillion yen ($115 billion USD) in three month funds at a rate of 0.1% in an attempt to stem deflation and shore up the ailing Japanese economy. The Japanese government is trying to stem the yen’s appreciation which is hurting major Japanese exporters.
Quick Forex Tip: Most forex brokers offer those interested in e currency trading training courses and demo accounts. Demo accounts allow new traders to trade in real time without risking actual funds. Many experts recommend that new traders use a demo account until they feel comfortable and confident trading. These trading platforms are available from most brokers. Additionally, there are several trading platforms available for free on the internet, offering access to a wide selection of currency pairs.
]]>The G 20 nations are meeting this weekend in St. Andrews Scotland and traders and investors around the globe are watching intently. Even the most oblique reference to currencies will have analysts trying to decipher some hidden meaning that could affect currency exchange rates. The Group of Twenty Finance Ministers and Central Bank Governors or G 20 is a collection of finance ministers and central bankers representing 19 countries plus the European Union. The G 20 economies represent 85% of all global gross national product (GNP), is responsible for 80% of all global trade and represents two thirds of global population. In addition to member nations the G 20 also includes the International Monetary Fund (IMF0, the World Bank, the International Monetary and Financial Committee and the Development Committee of the IMF and World Bank.
On November, 7 2009 the G 20 issued a communiqué which did not mention currencies directly. Earlier speculation had predicted that the G 20 would push for Asian nations to allow their currencies to appreciate. The communiqué pointed out that recovery has been uneven and the IMF has warned against pulling stimulus measures too fast. The IMF stated that growth has taken place but warned; “However, the pace of recovery is uneven, particularly in advanced economies, with consumer confidence remaining subdued, the waning of temporary fiscal measures such as the cash for clunkers programme in the U.S. and similar programmes elsewhere is slowing production.”
In their first communiqué the G 20 reflected the opinion of the IMF and said, “Economic and financial conditions have improved following our coordinated response to the crisis. However, the recovery is uneven and remains dependent on policy support, and high unemployment is a major concern. To restore the global economy and financial system to health, we agreed to maintain support for the recovery until it is assured.
There has been no further word about Asian currencies but the discussion is expected to take place before the meeting adjourns.
Quick Forex Tip: The International Currency Trading market has no central exchange like stock and commodities markets. Currency markets are dispersed throughout the world and the primary trading centers are, in order of importance, London, New York and Tokyo. The geographic dispersal means that markets are always open somewhere in the world and traders can jump on the internet and hopefully make very profitable trades at any time of the day.
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