| Currency Traders Pay Biggest Premium in 3 Years for Yen Calls
Feb. 7 (Bloomberg) -- Currency traders are paying the most in almost three years for options that protect against a potential rebound in the yen versus the euro, before Group of Seven finance officials meet in Germany later this week. Investors are hedging against the chance G-7 nations try to support the yen after it fell last month to a record low against the euro. German Finance Minister Peer Steinbrueck last week said the G-7 will discuss the drop in Japan's currency, which has weakened as the Bank of Japan kept its benchmark interest rate at 0.25 percent, the lowest among major economies. Traders are buying insurance against an unraveling of the so-called carry trade, in which investors borrow in Japan and buy debt in economies such as the euro region, where they can get 2 percentage points or more in extra yield.
London Leads NY as Foreign Exchange
London extended its lead over New York as the world's biggest center for currency trading in the six months through October, according to central bank surveys. Trading grew to an average $1.06 trillion a day in London during October, up 6% from April, and shrank 7.5% in New York to $534 billion in the period, semi-annual surveys conducted by the Bank of England and Federal Reserve showed. " London has always been the centre of foreign-exchange," a currency strategist in London at BNP Paribas SA, Ian Stannard, said. "It's continuing to grow." A growing share of the city's volume is from currencies other than the euro and dollar as eastern Europe economies expand and investors take advantage of Japan's low interest rates to sell yen and seek higher yields elsewhere.
Saxo Bank participates as Co-Sponsor in The Middle East Forex ...
'We are pleased to announce that Saxo Bank will be joining the ranks of international forex companies who will be at The Middle East Forex Trading Expo on 1-2 March in Dusit Dubai Hotel. Saxo Bank A/S, a modern investment bank specializing in online investments in the international Capital Markets is the Co-Sponsor of this 2-day Expo and Workshop,' announced Jean Louis Farwagi, Vice President of Arabcom Group, organizer of the event. Saxo Bank enables clients to trade currencies, shares, CFD contracts, futures, options and other derivatives as well as portfolio management via their online trading platform - SaxoTrader. SaxoTrader has been internally developed by Saxo Bank and is available to today's investor directly through Saxo Bank or through one of their global partnerships as an integral part of their own infrastructure.
International Monetary Fund’s Rato advises caution on carry trades
In response to questions, Rato said investors needed to be aware of the risks as well as the gains made from carry trades where investors borrow in yen or other low-yield currencies to invest in higher-return assets, a practice regarded as compounding yen weakness.
Carry trade is a decision by investors to consider what market circumstances are ... I again had to emphasise that what investors have to take into consideration are the chances of quick changes in the value of currencies. Rato also said the International Monetary Fund favoured a relatively light touch on hedge fund regulation, an issue Germany as G7 president urged the other industrial powers to consider on the grounds such funds may present systemic risks.
We endorse an indirect approach, that is to focus regulation on banks and counterparties, he said.
What will it take for dollar exchange rates to trend one way or ...
What will it take for dollar exchange rates to trend one way or the other? In our view, perceptions about the state of the world's major economies, especially the U.S. economy, would need to change. As illustrated by the very flat slope of the U.S. yield curve, most investors currently expect the Federal Reserve to keep rates unchanged for some time. A batch of weaker-than-expected economic data would stoke expectations of future Fed rate cuts, which likely would cause the greenback to weaken. Conversely, a slew of stronger-than-expected economic data would lead investors to the conclusion that the Fed will soon resume its tightening cycle. In that event, the dollar likely would appreciate. So where does that leave us? There are very few economic data releases on the docket this week, so it's not very likely that investor expectations will change markedly.
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