Relative EU exchange rates diverge

One technique for estimating the relative value of the Euro is to aggregate the value of all of the constituent EU currencies, using relative price movements as proxies for currencies. In Spain and Italy, for example, wages have skyrocketed over the past five years while productivity has lagged, which means these countries are relatively more expensive now. Germany, on the other

China’s reserves surpass $1 Trillion

The unthinkable has happened: China’s foreign exchange reserves have surpassed the historic level of $1 Trillion. Since the late 1990s, when China was continuously inundated with foreign direct investment, it has been forced to remove the foreign currency from circulation in order to mitigate the risk of inflation. Now,

New Index uses PPP to value currencies

The economic law of purchasing power parity (PPP) dictates that price levels and exchange rates should move in opposite directions. Stated another way, when a currency appreciates, its prices should decline proportionately so that the net effect on prices is zero. Methods for measuring PPP-let alone testing it- are imprecise. Recently, an Australian bank has capitalized on the

Declining Yuan hurts Chinese Exporters

Since China revalued the Yuan in July 2005, the currency has appreciated by over 6% against the USD. Having since moved past the Hong Kong Dollar, the currency is showing no signs of slowing down. American politicians and trade representatives could not be happier. Their Chinese counterparts, on the other hand, are peeved. Many Chinese exporters have been forced to lower their prices in order to offset the rising

Declining Yuan hurts Chinese Exporters

Since China revalued the Yuan in July 2005, the currency has appreciated by over 6% against the USD. Having since moved past the Hong Kong Dollar, the currency is showing no signs of slowing down. American politicians and trade representatives could not be happier. Their Chinese counterparts, on the other hand, are peeved. Many Chinese exporters have been forced to lower

Rate hike buoys British Pound

The British Pound received a boost today when the Central Bank of England raised interest rates to 5.25%, which represents parity with American interest rates. The move shocked investors and traders who expected the Bank to leave rates unchanged. Risk-averse investors are now fully incentivized to move funds to Britain

Canadian Dollar continues to slide

Since peaking in July, the Canadian Dollar has declined by over 6% against the USD, finishing the year down for the first time in five years. While movements in currency markets are often difficult to dissect, the reason for the fall of the loonie are not difficult to discern: falling commodity prices. Over the last few years, the Canadian Dollar has moved in near tandem with global commodity prices. Commodities now account for over half of Canadian exports, a figure which may grow further as Canada fine tunes its technique for squeezing valuable oil out of its now famous tar sands. Bloomberg News reports:

“The time to buy the Canadian dollar is nearing.” The currency will gain strength from a fast-recovering U.S. economy and the lack of a benchmark interest rate cut from the Bank of Canada in 2007, Citigroup predicted.

Read More: Canada’s Dollar Touches 11-Month Low as Commodity Prices Drop

Canadian Dollar continues to slide

Since peaking in July, the Canadian Dollar has declined by over 6% against the USD, finishing the year down for the first time in five years. While movements in currency markets are often difficult to dissect, the reason for the fall of the loonie are not difficult to discern: falling commodity

Commentary: 2006, the year that was

The books have been closed on 2006 for more than a week, which means it is time for the forex blogger to give his first-ever ‘state of the markets’ address. After a dull and static 2005, forex markets roared back into action in 2006, with several notable developments. On everyone’s radar screens, the world’s most important currency, the USD, declined by over 13% against the Euro and the British Pound. Analysts attributed the decline to narrowing interest rate differentials between the US and the rest of the developed world, as the US monetary cycle peaked while the rest of the world continues to raise rates.

Commentary: 2006, the year that was

The books have been closed on 2006 for more than a week, which means it is time for the forex blogger to give his first-ever ‘state of the markets’ address. After a dull and static 2005, forex markets roared back into action in 2006, with several notable developments. On everyone’s radar screens, the world’s most important currency, the USD, declined by over 13% against the Euro and the British Pound. Analysts attributed the decline to narrowing interest rate differentials between the US and the rest of the developed world, as the US monetary cycle peaked while the rest of the world continues to raise rates.

Yuan nears parity with HKD

Ignited by the threat of American trade sanctions and diplomatic pressure, the Chinese Yuan is now soaring against the USD. Last summer, it cleared through the psychological hurdle of 8 Yuan/USD and is now barreling towards 7.8. While this doesn’t strike most people as a significant milestone, the 7.8 barrier

FX markets punish hedge funds

As the markets ease into 2007, investors and money managers are beginning to think about how they want to (re)allocate their portfolios. While hedge funds will likely remain a popular investment vehicle, investors would be wise to avoid certain types of funds, namely those that utilize a “global macro” strategy. Technically, such hedge funds examine global economic