Tuesday, October 07, 2008

Bailout a bust for now....

The markets yesterday were chaotic. The dollar was king once again with the "Big Dollar" trading up against the Euro to the 1.3450 level. The Latam Currencies could not be sold fast enough.

Mexico. The day started with the currency at 11.3300. This quickly moved higher eventually topping out at 12.0000 (lots of trading up here). As stocks recovered so did the currency closing the day around 11.7800/8000 level. I think we could have put in a temporary top. I went home tiny short and will reassess tomorrow morning.

Chile/Colombia. Both currencies weakened against the dollar in a steady fashion. These are two currency pairs which are suffering from severe lack of liquidity. I will attack from the side of being long dollars. Current position is Long Usd/Clp and Short Usd/Cop. Dollar neutral. No real reason for this, but a "basically" hedged position.

Brazil. UGH. The dollar was limit up for most of the session with the BMF contract pinned at 2.1920. Offshore trading was reported at 2.2200 but once we hit limit up only very small size went through. Risk aversion and a horrible Stock market (limit down today also), at one point down over 15% make this a currency one should only short. My current position here is short Usd/Brl. I know I just said the opposite, but I am looking for us to open lower tomorrow morning as the Stock markets recovered late in the session. This is a position I will exit tomorrow whether I am in the money or out.

Argentina. No liquidity and massive spreads. I am small short dollars which I buy back at the end of the week naturally. My 01 risk is next to zero. This is a good situation for this currency pair for now.

I think the market is reacting this way because the Economy is clearly weak and the Europeans seem unable to help their situation. There was talk amongst a few friends today whether the Euro will be able to hold together. I think it will as there is so much invested in it, but could this discourage Asia and Middle East, both currently looking at a similar setup, from pursuing this route in the near future. I think so.

Good Luck and Good Currency Trading

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Anonymous Anonymous said...

"A friend just brought up a good question.....Does the Euro survive this ??"

This issue is repeatedly brought up by US and UK analysts and observers. I know that Euroland is made up of 15 different countries and that this number is set to be even higher in the coming years (e.g. Slovakia will join the Eurozone on January 1st, 2009. Keep in mind that all CEE countries which entered EU recently - Poland, Czech Republic, Hungary, and so on - will have to adopt EUR sooner or later, unlike former members, like UK, Denmark and Sweden, that chose to opt out).

The fact is that there's a banking and financial Eurozone and a real Eurozone, made of people which can now afford to make a few hours journey from Florence (Italy) to Munich (Germany) to see a football (sorry, soccer...) match or to spend a weekend in Paris or in Madrid without changing their coins. A real Eurozone made of businesses which can now afford to sell their goods and services to Slovenia or Finland without having to worry for such a thing like currency exposure. I mean, EUR is now a part of everyday life and is quite unconceivable to step back; after all, latest events prove how highly correlated EU economies have become...

Sorry for the lenghth of this post. Have a nice day, AT

PS: I wonder at what hours do you post your comments, since it's 9.20 am in Italy when I'm writing this and the post is dated October 7! Do you sleep at night?

3:22 AM  
Blogger Banker said...


Thanks for the insight. Certainly helpful to get a locals point of view.

Thanks for the comment.


7:03 AM  

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