Making Sense of Cents
Forex remains to be the largest market in the world and the least understood. Central banks have more influence on global markets than any other force. In other words, monetary policy is the ONLY economic indicator(s) investors should be watching, because let’s face it, if the Fed raised rates to 10% like they should do and called in all that QE money, stocks would collapse.
But yet Forex remains a mystery, something that someone may have mentioned or you heard about.. wait FX is a TV channel? or graphics? a movie?
One has to wonder who is more stupid, is it the clowns that worked for the big FX banks getting fined, jailed, or fired for misbehavior – or PBOC who seems intent to destroy not only any hope of becoming a ‘real’ currency (let alone a world reserve currency) but killing their trade markets as well:
In September last year, Chinese regulators stepped on the throat of a ‘fair’ market in equity futures trading and for all intent and purpose killed the Chinese equity market. Tonight – after 2 days of Yuan weakness – having warned everyon from Soros to Kyle Bass that “betting against the Yuan can’t possibly work,” The PBOC just unleashed plans for so-called “Tobin Tax” on FX transactions (which implicitly taxes each transaction, reducing liquidity, raising margins and reducing leverage).
CME Group (NASDAQ:CME), one of world’s leading derivatives marketplaces, announced that on March 10 it reached record trading volumes for forex futures and options. The record 2 517 334 contracts were traded on the Chicago Mercantile Exchange (CME). The number is 6% higher than the previous record of March 6, 2010. Also on March 10, were traded the record 2 350 478 forex futures contracts, exceeding by 142 061 the previous record of 2 208 417 contracts from May 6, 2010.
The record volumes were driven by the Euro FX Futures (EUR/USD) trade: $127.13 billion in notional value in futures and $18.5 billion in options.
As central banks become more and more like big hedge funds, and Forex markets become more volatile, there will be a growing need for Forex for any investment portfolio.
More and more public companies report ‘currency headwinds’ – the most notable recent report comes from Toys R Us:
Toys “R” Us Inc. said revenue slipped 2.6% in the latest quarter as the retailer faced currency headwinds over the holiday period.
The foreign exchange volatility was partially offset by the rise of same store sales of 2.3% in the fourth quarter. Currency woes, however, had a negative $169 million impact.
For the year, the toy store’s same store sales increased a modest 0.9%.
“Throughout the year, and especially …read more
Source: Making Sense of Cents
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