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China's Fores Reserves Boost Dollar
Everyone has a theory to explain the Dollar's explosive rally, which has yet to run out of steam. A recent one identifies a shift in China's forex reserve policy as a driving force. Apparently, in an ostensible effort to clamp down on inflation, the Central Bank of China is resorting to draconian measures. One rule change, which was executed with both speed and lack of media coverage, requires commercial banks to hold a larger portion of their reserves in Dollars, rather than Chinese Yuan. In addition, such banks face new restrictions on foreign debt, which is designed to turn them into net buyers of Dollars. Analysts suggest that this policy represents a roundabout attempt to slow the appreciation of the Chinese Yuan. If they are correct, than surely the Central Bank of China has succeeded, for the currency has virtually ceased in its interminable upward march against the Dollar. This upshot suggests that the goal of the Central Bank was not to fight inflation, but rather to avoid a post-Olympic economic slowdown. The Telegraph reports:
They are now more worried about growth than overheating, and you are seeing that play out in

the currency markets. There has been a remarkable change of view

the source :-http://www.forexblog.org/:- :."

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Why's the Dollar Rallying Again?
From Jack Crooks, Editor of World Currency Options and The Money Trader
What's Happening:
Everyone was just warming to the idea of a new dollar low - and now the buck started to rally. What's the driver? Maybe the decline in gold coupled with a small pullback in crude (see chart below)? But because they have been correlated, it is tough to say one or the other is the driver.
What We Say:
The new theme seems to be higher U.S. interest rates (the better than expected durable goods report Wednesday has helped validate this view). Also, the Fed may actually hike rates before the end of the year at least according to a lead story in the Financial Times yesterday. Whether it's true or not, the fact that it was in the paper represents a major shift in expectations. I'm not so sure about forecasting a Fed rate hike. But I've seen a decent move down in U.S. 10-year Treasury notes lately i.e. higher rates. And 10-year notes have been yet another price series moving in tandem with the US$ index. Below a chart of 10-year note futures vs. US$ Index Inverted (red line):
As You Can See, 10-Year Notes Have Been Stalking the U.S. Dollar Index

With 10-year notes tracking the U.S. dollar index, it's not certain what the Fed will decide to do next.
May 29, 2008
We’re sure you’ve heard of exchange traded funds (“ETFs”). Even though ETFs have only been around 15 years (starting with Standard & Poor’s SPDR back in 1993), it seems ETFs have gone mainstream and become the new “in” investment, much like mutual funds in the ‘90s.
But few mainstream investors take advantage of currency investing with ETFs – considering these special currency ETFs have only been available since 2006.
The official name for the currency ETFs is “Currency Trusts.” At last count, you can buy nine currency ETFs through any normal stock broker. You can buy all right on the New York Stock Exchange, except for the PowerShares DB G10 Currency Fund (DBV) which trades on the AMEX.
These ETFs mimic the spot price of the underlying currency they target – they hold actual currencies rather than futures contracts. A single share of each ETF represents 100 units of the base currency.
Here are some of the major benefits of this product:
Liquid at all timesTrade them as often as you'd like, at anytime during regular market hoursNo minimum investmentYou can short-sellYou can use margin and enhance your leveragePrice is tied closely to the underlying currencyHold them as long as you like – no time premium or expiration – so you can ride the long-term trend
Want to know which currency ETFs to buy, sell and trade? Every month, our currency analysts recommend timely ETF recommendations in our monthly members-only newsletter, as a long-term hedge against the buck. to get a sneak peek at what we see for the dollar’s future, and our monthly newsletter.

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Will the Aussie Continue to Track Gold?
From Jack Crooks, Editor of World Currency Options:
What's Happening:
A little food for thought today: If you look at the Australian dollar and gold on a chart, this pair usually moves together. (That's because Australia is one of the world's leading gold exporters.)
But overnight, more good news from the Australian economy has boosted the Aussie dollar.
What We Say:
Will gold follow? Or is the Aussie dollar overdone? Take a look at the chart below and see for yourself.
Where Are Both Headed?
For now, we're left to ponder whether this relationship will hold, but in the meantime, keep an eye on both the Aussie and gold to see how this pair fares.
Posted at 11:20 AM Permalink

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What's Happening to the Yen Risk Play?
From Jack Crooks, Editor of The Money Trader and World Currency Options.What's Happening:
The rule of thumb over the last year has been "buy the yen when stocks are down." But that all may be changing.
Stocks have been less than stellar lately yet the yen has pretty much been sliding against the buck. That's not exactly how it worked when sub-prime, credit crunch and write-downs were the new buzz words on Wall Street.
But yesterday the yen is giving us a little taste of old - stocks are weaker and the yen is firming up. But then again, that yen strength could be mostly technical. The dollar/yen pair is butting its head on overhead resistance.
After the run it's had since the middle of March, a bit of a corrective move (at the very least)

seems in order.

And while the yen's yield differential is not improving in this inflation-focused environment, a break above the key USD/JPY level could hit the yen hard and quick.
Still, in the short-term, playing the dollar short against the yen gives you a decent risk-reward set-up.
Stay tuned for more updates on the yen and its role in the global markets in the weeks to come...

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What Makes a Currency Exotic?
From Our Currency Research Team
Strictly speaking, in foreign-exchange trading, any currency that's not one of the seven majors is considered an "exotic" currency. So in other words, any currency besides the U.S. dollar, euro, British pound, Japanese yen, Canadian dollar, Swiss franc, and Australian dollar.
If you want to trade these seven major currencies, it's fairly easy to do so either by buying a currency ETF (like a euro ETF or Japanese yen ETF), or by investing in a foreign currency CD. You can also easily buy options for any of these, or trade them in the spot foreign-exchange market.
But what if you want to trade the exotic currencies? These are the currencies that are located "outside the box" — that don't fit neatly with the seven most commonly traded currencies.
First of all, you need to have a trader's blood. That's because these currencies are mainly tied to volatile emerging markets. That means these currencies can move fast — and you can either make or break your trading account very quickly.
These exotic currencies include:
NZD = NZ$ = New Zealand Dollar = Kiwi CNY = Chinese yuan HKD = HK$ = Hong Kong Dollars AED = Dirham = United Arab Emirates currency INR = Rupee = Indian currency BRL = Real = R$ = Brazilian currency RUB = Ruble = Russian currency CZK = Kč = Czech KorunaDKK = kr = Danish KroneHUF = Ft = Hungarian Forint. MXN = Mex$ = Mexican Peso NOK = kr = Norwegian krone PLN = zl = Polish Zloty. SGD = S$ = Singapore DollarZAR = R = South African Rand SEK = Swedish crown = kr = Swedish Krona THB = Thai Baht ISK = Ikr = Icelandic krona
Please look for more information on how to tame these exotic currencies coming in the months ahead.
Posted at 11:32 AM in exotic currencies Permalink Comments (0) TrackBack (0)
June 25, 2008
My Top Seven Currency-Trading Tricks
From Our Currency Analyst Sean Hyman:
If you're a stock trader or an avid financial news junkie, then you already have an edge over other beginning currency traders.
You just have to know how certain currencies react to the markets. Here are my top seven insider's tricks for "stock-picking" in the currency market.
1. Over a long period of time, the health of the U.S. economy influences the Canadian dollar. So if you're watching the U.S. markets, you know how the Canadian dollar will perform long-term. The U.S. depends on Canada for oil, lumber etc. So when Canada's major trading partner suffers, so do they.
2. The Canadian dollar (CAD) is highly influenced by oil. That means as oil goes up, it provides support for the CAD.
3. Gold is one of Australia's major exports, therefore the price of gold influences the Australian dollar (AUD). So as gold rises, the AUD rises.
4. The Japanese yen is the market gauge for risk. So when the Dow goes down, the yen generally goes up. When the Dow goes up, the yen generally goes down.
5. Agricultural prices affect the New Zealand dollar (NZD). That means as agriculture prices increase, it provides support for the NZD.
6. Japan likes to have a "cheap" currency. Since they are major exporters, they want their goods to appear very inexpensive.
7. The Eurozone and the U.K. have similar economies. So if you see the Euro or British Pound go upward, the other is likely to go up also. This is why in many years EUR/GBP will range trade. Range trading is where there is no definable trend upward or downward. It's basically sideways.

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Another Reason for Mr. Trichet to Hike Rates on Thursday
From Our Friend at EverBank, Chuck Butler:
What Happened:
In case you missed it, the euro pushed back higher overnight to 1.5775. And as luck would have it, the European Central Bank (ECB) meets on Thursday this week.
Yes, while most the markets' participants in the U.S. will be dreaming of barbequed ribs, fireworks, and a long weekend, the ECB will be hiking rates again.
What I Say:
The most important part of Thursday's decision will be ECB President Trichet's press conference following the rate hike. It will be important for Trichet to remain hawkish on the economy. Otherwise, profit takers will quickly swallow up all momentum from the rate hike. If that happens, the euro won't get to enjoy the higher rates and push higher.
Meanwhile, Trichet received an arrow for his rate hike quiver this morning. German unemployment for June fell to a 16-year low.
This tells me, and should tell you, the barber, and the guy down on the corner selling bakery pretzels that Germany is resisting the global slowdown so far.
Germany is the Eurozone's largest economy, so this report carries a lot of weight with Trichet and the other ECB ministers. Annual growth in Germany remains above that in the U.S. and the employment picture is healthier than the U.S.'s - but then again, that's not difficult these days.
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Brokerage firms - in Forex There are hundreds of brokerage firms operating through the Internet, some the size of the monthly circulation of several billion dollars is a lot of companies tracking States mismatch American and British are other States. On what basis will choose the brokerage company? What, you question him before they actually open an account and send your money to this company? There are many things that you should learn before they actually open an account with a brokerage companies Perhaps you are learning a lot of them but we raised by all here in one place. Ascertain the credibility of the company When you open an account actually the first action will do is send a sum of money to the brokerage firm to take into account it had used in the sale and purchase of currencies has been decided to open your account amounting to thousands of dollars. Before doing so, then we must make sure that the company, which will send them the owner is a company officially registered by the state to which they belong and, scored a clean and devoid of any manipulation or monument on customer deposits. There are several ways to do this kind of inquiry project remind them: Q directly from the company guarantees provided by the client funds to it. Official contact with the state of the company as possible. Asked the ancient titles of some customers and contact them and ask them about how to deal with the company's customers. Inquire about corporate America: U.S. government required all companies, institutions and individuals who deal mediate in the financial markets to the detriment of others register with the CFTC Briefly told Commodity Futures Trading Commission, the body of the governmental U.S. Congress specializing in organizing work in the financial markets of different types. Tracking this body and fall under the control of other self-regulatory organization called the National Assembly of the Futures National Futures Assosiation and shortened NFA this Assembly before the CFTC is responsible for overseeing private institutions and its registration and verification of compliance to the standards that ensure minimum safety dealers in this market in order to preserve investor funds In order to strengthen the confidence of national and international capital markets in America. There are many types of institutions and groups that fall under the control of NFA, including brokerage firms trading in the currency market. After advancing any brokerage firms in the capital markets to NFA all the documents that prove its approval of the standards give each company a record tariff own ID can be used both wanted to enquire about the history of this company since registered with the NFA, where each company scored borne by the company's name, address the actual The names of the founders and the number of cases against the company by customers that were government or not government and other information that will enable the customer to judge the credibility and integrity of brokerage firm. Can inquire about this information by contacting Alhataki from within the United States or through the NFA official website on the Internet where you can inquire about brokerage company that wanted by name or by number NFA own style is more accurate and better. Before you open an account with an affiliate of American mediation asked whether registered with the NFA, asks them to provide you with NFA ID number on it. In any case, most companies registered with this figure is clearly in its front page, but that has not been able to learn this figure yourself to the communications company and question them directly about this figure. After getting this figure you can go to the NFA site on the Internet and enter the number in an area dedicated to get the information available, which no doubt will help you judge the fairness of the company. You can access to the place which would put the company's No. NFA to enter the site at the following address: http://www.nfa.futures.org/basicnet/ Notably, the absence of No. NFA's brokerage company does not mean that the company does not have the credibility or integrity of everything there that the company, which has no NFA mean they consent to the NFA and CFTC standards and can be ascertained from official records is an official government. In all cases, please feel free to question about everything going on regarding the ballet company considering opening an account with the owner, this is your right to be reassured of the company, which will be deposited with the owner. It is also in the practice at the expense of hypothetical Demo account does not hesitate to question any matters or technical problems or other technical you experience rapid and accurate response from the Support Section Support to the company may

be considered evidence of the level of interest in the company's customers

the source.

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