Thursday, April 28, 2005

Pressure on China Mounts

Yesterday the World Bank came out "Urging China to abandon peg". I believe it is no longer a question of IF the peg goes but rather WHEN. Speculation is high that possible next week during Asian holiday's will be the time. I am looking at Oct 05 when the G7 meetings will be in Bejing.

Look for all Asian currencies to strengthen WHEN China moves on thier currency. Jpy,Sgd,Krw and Twd will be the biggest mover's ( Myr peg will also be under tremendous pressure).

No rate change in New Zealand last night, but very hawkish comments (rate decrease not in the near term and rate increases still a possibility in the future) gave new life to the Nzd currency. I continue to be long Nzd,Aud,Gbp against short Chf,Eur,Cad. This trade has been working out nicely.

These are the FX Trading Ideas for today.....

Good Luck to all.

Wednesday, April 27, 2005

Sell the Euro......

With a weak ISM number in Germany...French buisness morale low (as reported by reuters) and surprisingly strong consumer confidence numbers out of the States yesterday there is only one position to have SHORT EURO against the Dollar ! I am looking for a move (over time) down to the 1.2200 level and would consider myself wrong if we traded above 1.3480.

I continue to be short Usd/Mxn looking for the break lower and this has not worked out at all. Based on the statistics put out by the futures exchange in Chicago, there is a very high number of short Usd/Mxn positions in the market. Therefore a move higher, like we are seeing, can cause a short squeeze quite easily. I have cut my position in half and will attempt to hold on through the squeeze.

These are my FX Trading Ideas for today.

Good Luck to all

Monday, April 25, 2005

China coming under pressure

Speculation is in the FX markets today for a possible revalutation of the Chinese Remebi during next weeks holiday after comments from Chinese officials over the weekend. Chinese central bank governor Zhou Xiaochuan suggest that everything was in place for currency reform and the only outstanding issue was timing (as report by Reuters). He also said that increased international pressure will move up the timetable. I am trying to stay short dollar Asia (against Singapore and Yen currecntly). When they revalue is will be easiest to get in and out of those currencies.

Good inflation numbers in Mexico late Friday has taken the market by surprise. Although the forwards have drifted in to the left....Spot has weakened. I think these moves are temporary. The central bank has maintained that any increase in U.S. rates will be met with increases in Mexican rates. U.S. rate rises are agiven so stay short dollar Mexico !

These ar the FX Trading Ideas for today....

Good Luck to all !

Saturday, April 23, 2005

Foreign Exchange (FX) watching Stocks

Markets yesterday were extremely lackluster with no new economic numbers and dealers looking ahead to the weekend.

In Currencies
Yesterday I added to my short dollar Mexico position looking for a break of 11.00. We did but bounced right back and with no change inthe Corto the market grinded slightly higher. Late in the day very good inflation and growth numbers were announced and surprisingly the market jumped again. I will be watching this closly on Monday as I do not like the way Mexico reacted to the strong numbers (seems alot of shorts out there). I also sold Usd/Jpy and took it home over the weekend. This mostly on the back of the strong talk by the Bush administration and Greenspan for China to adjust is currency. Although I do not think it will happen this weekend I think near term something will happen(next 3 months). Saying all this I am afraid that my timing may have been alittle off and we may "squeeze" higher into monday.

Dollar rates are very closely watching Stocks. I am convinced that U.S. rates are going to continue higher. BUT if stocks suffer (and I think they will) look for a flattening of the curve. The FED does not want this but it will happen (unless China revalues then the back end of Treasuries will collapse). On the U.S. economy. I believe inflation is a problem for most American's. Fill up your gas tank (50 dollars for me to do it yesterday), pay your water bill, your monthly bus or train ticket....all of these things have gone up for me (and I am sure for most American's). This is money right out of your pockets. Money you cannot spend on dinners out, movies etc etc....So I do believe that the economy will slow down (maybe just a soft patch?) near term. Stagflation....I would not worry about that yet.

These are my FX Trading Ideas for Today.....

Good Luck to all

Friday, April 22, 2005

Wrong on the Zar

Although I still think there is upside to the dollar Zar trade I must be realistic and cut my losses here. I will however be looking for another opportunity to go long dollars in the future. For today I see little happening as no new economic numbers in the U.S. are due out.

Yesterday Greenspan was talking very aggressivly on the China revaluation issue (as have many members of the U.S. government. It looks to me that dollar Asia will trade heavy as long as this remains a "front page issue". Near term this looks to be the case.

Today I sold dollar Mexico (added to my already short dollar position). I also remain short U.S. dollar futures.

These are my FX Trading Ideas for today.

Wednesday, April 20, 2005

Zar Strengthens......

Ok So I have been wrong on this one so far. I think the reason is that there has been a reversal in thinking on the U.S. economy. The perception is that the U.S. economy is weakening and that rates will not rise as fast as previously thought. Dealers seem to be getting back into yield and South African Rand fits that catagory. Although I agree with that general thinking I do not feel that Zar will continue to benifit. I am holding on to my long dollar position (barley I must admit) for now.

Continue to watch the June Euribor contract. If we get back down to 97.75 I will be looking to go long again. Also this curve is getting Very Very Flat. The market is clearly looking for no change in rates. I will be looking for a spot to "fade" this move. I will let you know when I enter the position.

Good Luck to all

Tuesday, April 19, 2005

U.S. Inflation numbers

I think today is an important day for U.S. interest rates. A large PPI number and futures will once again sell off (this is what happened last night in the U.K.). A neutral to weak number and futures will rally (BIG!). I am waiting till after the number to take an outrite trading view. Currently I still have on short U.S. futures against long Short Sterling (looking for U.S. rates to out pace the U.K.) and my "yield portfolio" (long Aud,Nzdanf Gbp ag short Chf,Cad and Eur).

These are the FX Trading Ideas of the day

Good Luck to all

Monday, April 18, 2005

Futures continue higher....Strong talk on China

Finance Ministers from the group of seven economic powers on saturday vowed "vigorous" action to reduce economic imbalances. According to Reuters. It feels to me that the tide might be changing near term. Rates are lower,globally, on the back of fears that growth may be slowing. Be cautious being long EM currencies (although I still am) as these could suffer the most.

Friday, April 15, 2005

Futures higher !!!!

Interest Rate futures were higher this morning in all countries. This seems to be a result of profit warnings from IBM and Sun Microsystems yesterday. The market seems to be sniffing out a slowdown before it appears in the numbers. I took profit on my Euribors this morning.

I will be looking to reenter the June 05 if we get back down to 97.75. Otherwise I will be sitting out of those. In the Dollar I think it is way to strong. I am short and looking for it to weaken specifically against Europe. Good Luck !

Thursday, April 14, 2005

Surprise Rate announcement in South Africa

The Southt African central bank cut interest rates 50 basis points to 7% today. This cut was totally unexpected. Spot Zar went from6.18 to a current level of 6.3050. I believe this is only the beginning. I am looking for Zar to hit 6.48 quickly with an eventual target of plus 7.00.

Tuesday, April 12, 2005

Fed Minutes today

The FOMC minutes came out today and although I felt the minutes were quite bearish the market rallied in the face of it. I think it has more to do with "everyone" being short Eurodollar futures (and long dollars) rather then a change in direction. I continue to feel that the U.S. will outpace Europe and the U.K. with interest rate rises. I am currently positioned that way (through futures) and will stay that way. Yield also seems to be making a comeback. Higher yielders, led by Brazil,Mexico,Australia and the British pound are clearly leading the way. If you do go short dollars pick a higher yielding currency to get more bang for your buck. I have been running a dollar neutral portfolio (long Aud,Nzd and Gbp....Short Euro,Chf and Cad) since March 7 and it is finally up money (after being down 10percent). My point being Yield is back in play. Good Luck to all and any questions please let me know.

Thursday, April 07, 2005

ECB More Dovish then expected

ECB President Trichet said today the economic growth in the Euro area is continuing at a modest pace in the short term but that there is no clear signs of a moderating in underlying dynamism. These comments are more dovish then previous ones. I maintain that being long Euribor futures (and short Sterling for that matter) is the correct way to be positioned. To add more bang for you buck sell Eurodollar futures against them.