Wednesday, June 25, 2008

Trading Ideas....

I wanted to detail a few of the stories I have been profiling of late and discuss trades that I have on or that I am developing.


I feel there is some real potential here. Yes, it is a very dangerous currency to trade as liquidity is very poor, but yield if good and it seems to me that the Central Bank has a good hold on the market. For months now the story has been the Farmers Strike. It looks now as if it is about to end. BLOOMBERG is reporting that the

Argentine farmers increased their deliveries of grain to ports on the Parana River after farm group leaders met with President Cristina Fernandez de Kirchner yesterday to end a conflict over higher export taxes.

This is very good news for the fixed income market. Today the rates market did not react, but the spot has maintained its bid tone against the dollar. With inflation very high, it is in the governments best interest to keep the currency strong. I am looking for this curve to flatten in the coming weeks and for the spot to trade below 3.00.


The fundamental story here is very good. The Central Bank is acting in an independent fashion (Raising Rates) which investor's always like. Growth is good and the markets are opening up more and more everyday. I look for this curve to continue to steepen. The currency should also continue to strengthen. This currency trade has been in play for years, why stand in the way ? Get on board and Wait till the trend reverses. Remember, The Trend is your Friend.


I am putting these two together because I feel the stories are similar. Both Central Banks are intervening (buying dollars) on a daily basis (Chile 50mio and Colombia 20mio). This has certainly changed the direction of the currency and I do not see a compelling reason to fight the CB. Rates in both of these countries is trending higher. As such I prefer to be long dollars here. You could think of it as kind of a "Currency Basket". Long Usd/Clp and Usd/Cop and Short Usd/Ars and Usd/Brl. A currency basket yes, just not an easy one to get out of if things go poorly.


Terribly inflation numbers today coupled with stronger then expected growth equals one thing HIGHER RATES. Look rates to move higher and the currency to test the 10.00 level.


As a few might have noticed I have stayed clear of this currency of late. I trade this currency very poorly and think it is best left to others.


I am small long dollars against the Yen. I am hearing that 108.05 is a "key" level. I don't necessarily care about that , but rather I like being long dollars and I have not been able to successfully hold a short Euro position.

These are just my opinions, but would like to know what others are thinking.

Good Luck to all and Good Currency Trading.



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