Canadian Dollar Approaches Parity

After a multi-year run-up against the USD, the Canadian Dollar has been relatively quiet of late, gradually inching up but mostly trading flat.  Last week’s release of Canadian retail sales data, a relatively mundane economic indicator, jumpstarted the currency and sent it upwards against the USD.  As a result, Canada’s Central Bank is mulling its first rate hike in over a year, directly aimed at controlling its currency.  In the short term, however, higher interest rates would likely bring more capital to Canada.  With a booming economy and stock market to match, the country has never been more attractive to investors.  Commentators are once again whispering about USD-CAD parity (a 1:1 exchange rate), an event that up until a few years ago, most would have dismissed as impossible. The Star reports:

Canada’s buoyant dollar reflects not just a weakening U.S. currency but a booming economy that is benefiting from higher prices of crude oil and metals like copper and gold, prompting big takeovers in the mining industry from foreign companies.

Read More: Currency hits highs not seen since 1970s

Commentary: What to do about the Chinese Yuan?

The Chinese Yuan refuses to die as a topic of conversation among forex speculators. In theory, the currency is among the world’s most prosaic; since its famous “revaluation” by the Chinese government nearly two years ago, the Yuan aka RMB has appreciated at a leisurely pace, roughly equivalent to 3% per year. Last week, the CCP took a step further in liberalizing its currency system by widening the band in which the Yuan is permitted to fluctuate, to .5% daily.

Commentary: What to do about the Chinese Yuan?

The Chinese Yuan refuses to die as a topic of conversation among forex speculators. In theory, the currency is among the world’s most prosaic; since its famous “revaluation” by the Chinese government nearly two years ago, the Yuan aka RMB has appreciated at a leisurely pace, roughly equivalent to 3% per year. Last week, the CCP took a step further in liberalizing its currency system by widening the band in which the Yuan is permitted to fluctuate, to .5% daily.

Commentary: What to do about the Chinese Yuan?

The Chinese Yuan refuses to die as a topic of conversation among forex speculators. In theory, the currency is among the world’s most prosaic; since its famous “revaluation” by the Chinese government nearly two years ago, the Yuan aka RMB has appreciated at a leisurely pace, roughly equivalent to 3% per year. Last week, the CCP took a step further in liberalizing its currency system by widening the band in which the Yuan is permitted to fluctuate, to .5% daily.

China’s Forex Arm Begins Investing

China’s Central Bank recently made waves in forex markets when it created several state-owned organization charged with investing a portion of China’s $1.2 Trillion in forex reserves.  Scant additional information was released until last week, when it was revealed that the first major investment would be a $3 Billion stake in The Blackstone Group, which is planning an Initial Public Offering.  While it should be clear that China is taking its plan to diversify its reserves seriously, the news should come as a partial relief to Dollar Bulls, because in this case, the diversification will not involve the sale of USD.
Read More: Blackstone details float as China

China Increases Yuan Trading Band

In a sop to western policymakers, China recently announced that it would widen the Chinese Yuan’s daily trading band, from .3% to .5%.  In theory, this means the Yuan will now be permitted to fluctuate by up to .5% per day against the USD.  In practice, however, the Yuan’s daily rate of appreciation probably won’t exceed .05%, and only then on an especially volatile day.  Two years ago, China revalued the Yuan and since

Corporate Profits Buoyed by Forex Gains

While the American economy is sputtering, US corporations are earnings record profits and stock market capitalization is soaring.  These seemingly contradictory trends are being driven by the decline in the USD.  Multinational corporations, especially those based in the US, are conducting a growing portion of their business abroad and subsequently, their foreign sales are booming. 

Fed Tries To Maintain ‘Goldilocks’ Economy

Today, the US Federal Reserve Bank announced that it would hold the benchmark federal funds rate at 5.25% and will likely wait a few more months before nudging rates upward or downward.  In a press release that accompanied its monthly meeting, the Fed was unusually candid, indicating that it is receiving conflicting signals from economic data.  On the one hand, the

Commentary: Implied Volatility Explained

Technical analysts use a myriad of indicators and indices to
try to gauge where currencies are headed. Many seek insight in the prices of derivatives, where forwards, futures,
options, and swaps are used to make bets on the future movements of
commodities, securities, and even currencies. Let’s ignore swaps, which are more complicated and virtually
inaccessible to retail investors.  Currency

Commentary: Implied Volatility Explained

Technical analysts use a myriad of indicators and indices to
try to gauge where currencies are headed. Many seek insight in the prices of derivatives, where forwards, futures,
options, and swaps are used to make bets on the future movements of
commodities, securities, and even currencies. Let’s ignore swaps, which are more complicated and virtually
inaccessible to retail investors.  Currency

Carry Trade Beginning to Unwind

Nearly two months ago, China’s stock market declined 15% in one session, leading capital markets around the world to drop off precipitously. This collapse quickly spread to forex markets, where spooked traders began to unwind their Japanese yen carry trades, fearful that the volatility would trigger a short squeeze, causing the Yen to rapidly appreciate. While the yen has returned to its former low levels, it seems foreign investors have prudently unwound up to 60% of their short positions in the Yen, anyway.