Month: November 2011

By David Frank, Chief Market Analyst, AvaFX

The Australian Dollar appears to have been the worst performing major currency last week against the U.S. Dollar. It ended up falling by 3.10 percent. The Aussie’s underperformance comes as no surprise. This given deteriorating global sentiment rooted in Euro zone miscues. The negative outlook markets have collectively taken has weighed on the higher yielding currencies and other risk correlated assets, such as equity markets. Still, despite losing 7.89 percent against the Dollar already in November, there appears to be more room to the downside, even though a corrective bounce cannot be ruled out. The next support level is the October 4 low, at 0.9388.

Australian data has not been the reason for the currency’s decline.  It has been deteriorating global sentiment. This past week, although market conditions were notably ‘thinner’ given Thanksgiving in the US, Euro zone debt fears crushed any good news. Also, fears of a hard Chinese landing flared again after data showed that Chinese manufacturing production fell to a 32 month low.

Also of note, the ever tightening liquidity evident in the financial markets has weighed on the Aussie. The Euribor-OIS 3-month spread, which happens to be the rate at which Euro zone banks lend unsecured funds to one another, is pushing highs not seen since 2009. Now, the last time the Euribor OIS 3-month spread was like this was the week after Lehman Brothers collapsed in September 2008.

Looking ahead, there is not much to be said in terms of market moving data that could alter the Aussie’s.  A major bounce will only happen if the situation in Europe shows signs of improvement. The most important piece of data facing the Australian Dollar is Friday. This is when housing market data is due. Building approvals are forecasted to have contracted by 14.4 percent in October from the same period in 2010. This is an ominous sign that the Australian housing bubble may be about to burst. Lower Chinese demand for Australian goods coupled with a deflating housing sector will accelerate the Aussie’s gains going forward.

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DISCLOSURE & DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER.  FOR MORE INFORMATION AS WELL AS UP TO DATE FOREX ANALYSIS VISIT Fx-Insights. forex daily news.

The past week in monetary policy saw interest rate decisions announced by 6 central banks around the world.  Of those changing rates, Georgia dropped -25bps to 7.00%, Egypt increased +100bps to 9.25%, and Colombia increased +25bps to 4.75%.  Meanwhile those that held interest rates unchanged were Turkey at 5.75%, Nigeria at 12.00%, and Russia at 8.25%.  Croatia also announced a cut to its Lombard rate (-275bps to 6.25%).  Elsewhere, China made headlines when it was revealed that a number of rural cooperative banks were to have their required reserve ratios reversed by 50 basis points to 16.00%.  Also, the ECB noted it had purchased EUR 8 billion last week, up from EUR 4.5 billion the previous week.

Following are some of the key comments and quotes from central bankers that announced monetary policy decisions over the past week:

• National Bank of Georgia (dropped rate 25bps to 7.00%): “Given that the total output is below the potential and the existing forecasts indicate that the inflation in the next year will remain below the target, the Monetary Policy Committee of the NBG considered it appropriate to continue easing the monetary policy and decided to decrease the policy rate by 25 basis points.”
• Central Bank of Turkey (held rate at 5.75%): “Recent data releases suggest that the rebalancing between the domestic and external demand is ongoing as envisaged. With the credit growth decelerating to more reasonable levels, the desired increase in private  savings has already started to take place. Accordingly, the improvement in the current  account balance is expected to become more significant in the final months of the year.”
• Central Bank of Russia (held rate at 8.25%): “Considering recent domestic and international macroeconomic developments the Bank of Russia judged that the current level of money market interest rates was appropriate to balance the inflationary risks and the risks of economic growth slowdown.  The increase in money market interest rates, resulting from the transition to the liquidity shortage in the banking sector together with the instability on the global financial markets, puts upward pressure on other interest rates in the economy.  Thereupon the Bank of Russia will continue to monitor the money market conditions and the external economic developments, and to assess the risks of further increase in the market interest rates and its consequences.”
• Central Bank of Colombia (increased rate 25bps to 4.75%): “Given the central forecast described above, and the risks of financial imbalances, the Board considers it prudent to increase 25 basis points interest rate intervention and believes that this movement is achieved monetary stance which helps to maximize the growth of output and employment consistent with the achievement of future targets for inflation. This decision also includes the possibility of early detection of a substantial change in external conditions of the economy and to react quickly to it.”

Looking at the central bank calendar, there’s a series of emerging market monetary policy decisions due to be announced; Brazil will be one of the key ones to watch as it previously cut its rate twice in a row at its past two meetings.  The other emerging market central banks will also be informative in terms of how the policy makers are thinking about their economies.  Elsewhere the US Federal Reserve will release its Beige Book economic survey on Wednesday.

By Johnny Smiths

Due to Forex trading getting a lot of media coverage on news channels and the internet, opening a Forex account has popularized. Along with the banks and investment companies, individuals can also trade on this market with just an internet connection and computer. However, small or individual investors often have a high loss rate with the forex venture. Forex Managed Accounts are the best solution for them.

The most risky part in this market is that the rate of currencies changes abruptly. In such situations new users may find it difficult to profit without the assistance of experienced traders. For this reason traders have to devote a lot of time, may be the full day, full week and even the whole month observing the pattern of the market. Generally sole traders are often not disciplined enough or do not have so much time because Forex is a secondary source of earnings.

Pertaining to the liquid nature of this market, losing is a common phenomenon. Traders must not invest any amount which they cannot afford to lose. In a market where turn-over touches some billions every day, these personal loses are puny though it may be big for the individual trader. But with an account which is managed by professionals and experts the risk reduces substantially.

The broker companies or firm uses the money in the individual trader’s account to buy and sell currencies in this market. Though there may not be any guarantee on the brokering company but the few reliable ones have benefited the trader.

The individual does not need to pay the fees for the professional handling of the account until and unless there is some profit. There is some percentage on the profit amount that the firm deducts as fees leaving the main investing balance intact.

The best part of getting the account managed is that the account holder can supervise the trading going on. Both the parties want to gain advantage and hence, the trader is more on the profitable side. The trader does not need to waste his time and energy but gets a good return at the end. At the same time the same trader can invest in other funds and investment options. There is no restriction in investing alternatively.

The trader also has this option of accessing the account the check the broker’s status at any time. If the trader wishes the account can be monitored 24 hours a day as the foreign exchange market runs all day for 5 days of the week. The managed accounts are also held as individual client’s account so that the management has no real access to the money.

With all these facilities given by the management of a broker company individuals are at low risk to lose their wealth for reasons like inexperience and bad management. The professionals are good at such jobs because they know the ins and outs of the market. The only requirement from the trader’s side is to choose a good Forex managed account.

About the Author

There is a high risk of inexperienced traders losing money in the forex market. With a forex managed account you can trust your money in the hands of a talented forex trader with a proven success rate. Many people are now turning to forex managed accounts as a means of creating a stress free, profitable forex trading environment.

In layman’s words, foreign direct investment refers to the situation when a particular company or an individual belonging to one country invests in another country. The investment which is done could be a physical one like construction of a factory, land purchase, mining activities, etc.

Apart from the above mentioned types of foreign direct investment, joint-ventures as well as reciprocal-trade agreements are the other investment options to which one can resort to. In a joint venture, there are basically two or more than two organizations which handle the financial and the management of the investment made in foreign country whereas in the reciprocal- trade agreement, the two companies which make the same type of products reach on an agreement to proceed further as the distributor of each other at their own home country. Licensing a company to produce products in some other foreign county is also a form of investment falling under the category of FDI.

When any company makes a foreign direct investment for its expansions in another country, then it is termed as the horizontal foreign direct investment. On the other hand, when the companies make investments for increasing its sales and for the growth in business, then it is termed as vertical foreign direct investment. Vertical FDI occurs usually when any company assumes the role of a distributor or a supplier for any type of finished goods. This again can be divided into forward and backward vertical FDI.

When the company takes the role of a supplier then it is referred to as the backward vertical FDI and when the company acts as a distributor of the products is any other country is referred to as forward FDI. The company is always benefited by the FDI’s as it enhances the reputation of the company by creating more job opportunities. Moreover the costs of the final goods which are produced are also less as the cost of import is not there. Foreign direct investment aids in increasing the levels of production and also in lowering the cost of production.

When a company thinks of investment options, especially that of FDI, then it needs to contemplate of various factors for accessing the foreign markets.

It needs to make a stock of the domestic resources so that it has sufficient human resource as well as the financial stability for carrying on with the new undertaking.

Apart from this, it also needs to check whether the potentiality of the market for the product it is going to launch. A thorough market study is essential before making a FDI decision. The competition that exists in the market and the consumer behavior are the other factors which need consideration if one is thinking of foreign direct investment.

Both the developed countries as well as the developing countries are able to attract foreign investment in various ways today.

For e.g. it has been seen that few countries provide loans at a very low interest rates which makes most of the individuals living outside, in other countries avail the loan options in those countries.

About the Author

Harjeet is an Indian – born mass-market novelist, who covers the world internet related topics . He writes columns and articles for various websites and internet journals in the domain of Investing in India and Investment options.

Nov. 25 (Bloomberg) — John Woods, Hong Kong-based chief Asian strategist at Citigroup Inc.’s private bank, talks about the European debt crisis, its implications for global financial markets and investment strategy. Woods speaks with Rishaad Salamat, Mia Saini, John Dawson and Zeb Eckert on Bloomberg Television’s “Asia Edge”. (Source: Bloomberg)

Nov. 25 (Bloomberg) — Terry Burgess, chief executive officer of OZ Minerals Ltd., Australia’s third-biggest copper producer by market value, talks about the outlook for the metal’s prices and demand. Burgess also discusses the company’s growth strategy. He speaks with Rishaad Salamat on Bloomberg Television’s “On the Move Asia.” (Source: Bloomberg)

Nov. 25 (Bloomberg) — Tens of thousands of protesters occupied Cairo’s Tahrir Square to demand that Egypt’s generals cede power even after they appointed former Prime Minister Kamal el-Ganzouri to form a new government. The ruling army council said elections due to start on Nov. 28 won’t be postponed and it will stay in power until the presidential vote to be held by June. Margaret Brennan reports on Bloomberg Television’s “InBusiness With Margaret Brennan.” (Source: Bloomberg)

Nov. 25 (Bloomberg) — Marc Ostwald, a fixed income strategist at Monument Securities Ltd., discusses the International Monetary Fund’s role in rescuing debt-laden euro-zone nations. He talks with Owen Thomas and Linda Yueh on Bloomberg Television’s “Countdown.”

Nov. 25 (Bloomberg) — Martin Schulz, a senior economist at Fujitsu Research Institute in Tokyo, discusses the outlook for the Japanese economy, inflation and the yen after consumer prices fell for the first time since June. He talks with Owen Thomas on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

Nov. 25 (Bloomberg) — Alastair Newton, an analyst at Nomura Holdings Inc., talks about the European debt crisis and tensions in the Middle East. He speaks from London with Owen Thomas on Bloomberg Television’s “The Pulse.”