FX TRADER MAGAZINE
April - June 2011
Look at the recent eample withPortgal. Tis is what DetscheBank’s Mike Reid had to sa abotthe sitation:
“Tis is probably the rst time we’e seen ECB interention or reasons as much due to the rising yield environment as much because o weak spread sentiment. It shows why keeping core bond yields downis so important across thedeeloped world gien theexcessie debt burden that still lingers eerywhere. It’s not just a European issue as it was alsointeresting to see yesterday that Freddie Mac’s aerage 30-year xed rate US mortgage rate aeraged 5.05% or the week ending 10th Feb (om 4.81% in the preiousweek) and now at its highest leel since April 2010. When Bernankeintroduced QEII, keeping yields downto help housing was one o the goals. Sothis is another thing to keep an eye on.
It seems the crrent trend in solving theglobal crisis is to print more crrenc.Beore the crisis, this was a niqel Japanese strateg. Ten the ed beganQantitative Easing, and fnall E2.Te SNB has joined the devalation part, and broke records b prchasing pts o 78 billion CH in one month.
“We would need to check my records alittle more careul but we suspect the SNBhas set a new world record with its FX interention in May. Data released bythe Swiss Statistics Oce and conrmed to us by the SNB puts interention at CHF 78.8bn in May (yes, that is thechange o reseres, not their leel). o put this into perspectie, this is nearlythree times the preiouslargest monthly interention and amounts to 15% o GDP in just one month. Current reseres are now CHF 232bnor 43% o GDP.” (Extract rom “JPM RidiculesSNB Interention”
Other markets, sch as Astralia,and emerging markets sch as India,are not mch dierent. See a charto another twist that man investorsdo not nderstand, while the
fx, THE NEW ANTI ASSET-CLASS
What do devalationsand increasing ood prices mean orinvestors?he world economis o on a corseo radical crrencdevalations.
As the global economic climate deteriorates, x is becoming more and more rel-evant. Investors are becoming aware that while the ma have positive retrns inthe markets, those retrns are being eaten awa b a combination o inlation andcompetitive devalation o crrencies.
It seems the crrent trendin solving the global crisisis to print more crrenc