Tuesday, September 09, 2008

Emerging Markets continue to melt....

Markets initially opened on a positive note on the back of the Freddie and Fannie bailout. But all good things come to an end and so did the Emerging Markets rally.

Latin America: After opening stronger in all currencies the market reversed course and moved toward new lows. This signals to me that there is more to come. I think being long dollars is the way to be especially against Emerging Markets.

Brazil could not rally in spite of talk that the Central Bank is on the verge of raising rates yet again.

Brazil's central bank may raise the benchmark interest rate this week to the highest in two years, seeking to cool domestic demand and rein in inflation.

Policy makers led by President Henrique Meirelles will lift the overnight rate to 13.75 percent from 13 percent, the fourth increase since April, according to 28 of 29 economists surveyed by Bloomberg. One forecast the bank will raise the so-called Selic rate to 13.50 percent.

``Policy makers will only end the tightening cycle in January, when we get clearer signs economic activity is slowing,'' Mauricio Oreng, senior economist at Itau Corretora in Sao Paulo, said in a telephone interview. ``The central bank needs to make sure slower inflation isn't due to just a temporary ease of commodity prices.''

This as CPI and GDP both showed a rise again today.

There was talk today that,

Thirteen Wall Street dealers agreed ``unanimously'' that the government takeover qualifies as a so-called credit event that allows parties to credit-default swap trades to demand face value on the amount of debt covered by the contracts, according to a memo obtained by Bloomberg News today. Investors use the contracts to hedge against losses on their Fannie and Freddie debt holdings or speculate on the companies' creditworthiness.

``The market is not experienced at settling a credit event for a name of this size, so it is a bit of an unknown,'' said Sarah Percy-Dove, the head of credit research at Colonial First State Global Asset Management in Sydney

Not a pretty picture is being painted.

The best advise I can give is to trade very short term. Take smaller profits and have well defined Stop Losses before you enter into trades. Not the usual way that I trade but one must adapt to market conditions.

Good Luck and Good Currency Trading.......



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