Sunday, April 12, 2009

Currency Update - April 12

Let see where prices are from my Quarter 1 review:

The general theme presented for for Quarter 2 was dollar weakness:

If you have not read it yet


Prices at the time as listed (beginning Quarter 1):
GDP/USD: 1.42
EUR/USD: 1.32
AUD/USD: .69
USD/CAD: 1.23

Current Prices taken from the spot:

GDP/USD: 1.464
EUR/USD: 1.315
AUD/USD: .72
USD/CAD: 1.225



I would have to say indeed overall we are seeing this dollar weakness trend unfolding. I wonder how correlated this can be with the equity strength in the US markets (if there is any correlation I should definitely worried as i just predicted this bear market rally not continue to the end of the second quarter).

For those not familiar with the currency markets prices are quoted by .0001 as one pip leveraged at 200:1 for standard lots (100,000 units)(equivalent to a basis point). As you can see I am significantly up on some of my positions.

I am up about 3% for the pound, down around -0.4 on the EUR, up around 4.3% on the Aussie, and last but not least up about .4 percent on the loonie.

The most puzzling thing I would have to say is the EUR, I'm surprised it is not keeping pace with the pound, this may be reflecting poorer fundamentals in the EURO zone. Another interesting note, would be the Aussie, I wonder what is driving this strong Aussie dollar besides paused interest rates, I wonder if there is any underlying fundamental driver for this cause (maybe a return to carry trade significance?).

Either way I doubt I will have time to do a meaningful analysis; as finals approach so soon.

*on a personal note: at the rate the pound is recovering it looks like ill be back on a fish and chips diet :*(


  1. wow,economic person! (Tina)

  2. Hi Alex, your last 2 posts are nice and very precise as usual. I'll need more time to read the one on the stock market, let me give my comments for the FX for now.
    Since Sept 08, the key driver on the FX markets (particularly the USD) seems not to have been the interest rate differentials anymore but more driven by the risk aversion/appetite. It was very true in particularly for the USD (considered as a safe haven) and the JPY (unwind of carry trades). I've looked the historical correlation between the EURUSD and the DJI, starting mid Aug 08 when it became positive, it climbed to reach a top of 89% (!!!) in Dec 08 then it fell back to 34% as of today (this last result surprised me as I expected the correl to be still strong). On my side, I'm still playing the return of risk aversion and the EURUSD on the down side (actually I initiated a short EURUSD below 1.35 recently, for now it does well, even if I'm right for the wrong reasons... for now :-) In addition, the EUR can be pressured in the near future should the ECB start QE (for now, the ECB council seems not ready to agree on anything, which is bear for the EUR). For the longer term, please keep in mind that the Eastern Europe might be Europe's subprime !

    By the way, I find your mention of the 200:1 leverage as a standard may be a bit inappropriate for the holding time of your positions (quarter if I understand well). At a 200:1 leverage on the EURUSD, you are out of your position (100% of your margin) should the EURUSD goes 65 pips against you (which is roughly the 3-hour volatility!).


    PS : I've changed my blog, should you want to keep on following it, you need to click on "Follow" again at its new location, sorry for any inconvenience


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