Speculators, central banks, corporations, governments, financial institutions, and other constituencies ask similar types of questions every day. But only the main offices of Bank of China accepts traveler’s check and cash advance. The largely over-the-counter global foreign exchange markets (no central exchange) are ubiquitous, measuring in the trillions. The BIS (Bank for International Settlements) computed the value of traditional foreign exchange markets at $3.2 trillion in April 2007. Without getting lost in the minutiae of foreign exchange currency trading, I think it’s helpful to step back and realize that regardless of strategy, currency, interest rate, inflation, peg-ratio, deficits, sovereign debt, or other factors, money will eventually migrate to where it is treated best in the long-run.


When it comes to currencies, it’s my fundamental belief that economies control their currency destinies based on the collective monetary, fiscal, and political decisions made by each country. Currency Trading Ice Cream Style As mentioned previously, currency trading is predominantly conducted over-the-counter, outside an exchange, but there are almost more trading flavors than ice cream choices at Baskin-Robbins. For instance, one can trade currencies by using futures, options, swaps, exchange traded funds (ETFs), or trading on the spot or forward contract markets. On the flip side, higher currency values make imported goods and services that much more affordable – a positive factor for consumers. Soros & Arbitrage Vigilantes Hedge funds, proprietary trading desks, speculators and other foreign exchange participants continually comb the globe for dislocations and discrepancies to take advantage of.


The Bank of England fought hard to defend the value of the pound in an attempt to maintain a pegged value against a basket of European currencies, but in the end, because of the weak financial condition of the British economy, Soros came out victorious with an estimated $1 billion in profits from his bold bet. What I do know is the healthier economies making prudent monetary, fiscal, and political decisions will be more resilient in protecting themselves from arbitrage vigilantes.



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    29.07.2013