Forex - Dollar Drops Versus Euro

Dollar Drops Versus Euro on Concern Foreign Investors Can't Fund Trade Gap
March 15 (Bloomberg) -- The dollar declined against the euro after a Treasury Department report showed foreign purchases of U.S. securities were less than the amount needed to finance the trade deficit for a second-straight month.

International investors bought $66 billion of Treasury notes, corporate bonds, stocks and other financial assets in January, up from a revised $53.8 billion in December. Foreign investors need to exchange their currencies for dollars to buy U.S. securities.

``This is a slight negative for the dollar, because the number came out below the trade deficit,'' said Greg Anderson, a currency strategist with ABN Amro NV in Chicago.

The dollar dropped to $1.2034 against the euro by 10:50 a.m. in New York from $1.2013 late yesterday. The U.S. currency was little changed at 117.55 yen, and was lower versus 14 of 16 most actively traded currencies tracked by Bloomberg.

The dollar slumped yesterday after a government report showed the U.S. current-account deficit widened to a record in the fourth-quarter.

Forex Trading - Euro Advances

Euro Advances as ECB Officials Suggest Interest Rates Still Headed Higher
March 8 (Bloomberg) -- The euro rose against the dollar and yen as European Central Bank officials suggested the region's interest rates may be headed higher, after two rate boosts by the central bank in three months.

Europe's currency gained against 11 other major currencies as council member Axel Weber warned of inflation risks in the region. Council member Klaus Liebscher said rates are still ``very low.'' The euro has gained 0.6 percent versus the dollar this year on expectations the ECB will raise its benchmark to a four-year high of 3 percent from 2.5 percent now.

``It's consistent with the message that rates are going to go higher and that's definitely a positive for the euro,'' said Marios Maratheftis, a currency strategist at Standard Chartered Plc in London. ``Although the ECB might not close the rate gap with the U.S. there will be some competition rather than further widening.''

The euro climbed to $1.1924 at 10:33 a.m. in New York, from $1.1888 late yesterday, and earlier reached $1.1941. It also rose to 140.52 yen, from 140.02 yen. The yen was little changed at 117.90 per dollar, from 117.86 yesterday.

There is ``a considerable excess of liquidity and the trend is expansionary,'' Weber was quoted as saying at a dinner yesterday in Dusseldorf, according to Reuters. The ECB last week raised borrowing costs by a quarter-percentage point to 2.5 percent to curb inflation. ``The economic outlook has clearly brightened for both the euro area and for Austria,'' Liebscher said in a speech prepared for delivery in Vienna today.

Yen Bets

The yen snapped fell the past three days against the dollar as traders reduced bets the Bank of Japan would start raising rates from zero percent as early as this year. Interest rates in Japan are the lowest in the world, leading the nation's investors to funnel money abroad.

``The market has the sense that the BOJ is in the mood to alter policy, but there could be longer to wait,'' said Tim Fox, a currency strategist at Dresdner Kleinwort Wasserstein in London. ``The yen has taken that into account.''

Japan's central bank may reduce the cash it makes available to lenders, a precursor to raising interest rates, according to eight of 13 economists surveyed by Bloomberg on March 3 and 4. The bank announces its decision tomorrow after a two-day meeting.

Three-month euroyen futures indicate traders this week have cut bets the central bank will raise rates by 25 basis points, or 0.25 percentage point, in the last quarter of 2006.

Forex Trading - Advantages and Risks

The cash/spot FOREX markets possess certain unique attributes that offer an unmatched potential for profitable trading in any market condition or any stage of the business cycle:

A 24-hour market: A trader has the chance to take advantage of all of the profitable market conditions at any time which means that there is no waiting for the 'opening bell' like the exchange.

Highest liquidity: The FOREX market is the most liquid market in the world. That means that a trader can enter or exit the market whenever they want during almost any market condition minimal execution barriers or risk and no daily trading limit.

High leverage: A leverage ratio of up to 400 is normal when compared to a leverage ratio of 2 (50% margin requirement) in the equity markets. Of course, higher leverage also means higher risk.

Low transaction cost: The retail transaction cost (the bid/ask spread) is actually less than 0.1% (10 pips) under the normal market conditions. At larger dealers, the spread could be less than 5 pips, and may expand a great deal in fast moving markets.

Always a bull market: In essence, a bull market or a bear market for a currency is defined in terms of the outlook for value against other currencies. If the outlook is positive, you get a bull market where a trader profits by buying the currency against other currencies. However, if the outlook is negative, we have a bull market for other currencies. In either case, there is always a bull market trading opportunity for a trader.

For more, see the full article at The Forex Center

Forex Trading - March 6

Yen Declines Against Dollar as Koizumi Urges BOJ Caution on Policy Shift
March 6 (From Bloomberg) -- The yen fell the most in a month as Japan's Prime Minister Junichiro Koizumi urged the central bank to ``make a careful decision'' when deciding this week whether to end its policy of keeping interest rates near zero percent.

Japan's currency declined to an almost two-week low as investors pared bets the Bank of Japan will lift rates this year. Chief Cabinet Secretary Shinzo Abe also said ``mild deflation'' still lingers in Japan.

``Investors got too excited about a near-term policy change,'' said Sophia Drossos, a currency analyst at Morgan Stanley in New York. ``This is probably not the time to bet on yen strength. We need to add more fuel to the fire to get going.''

The yen dropped to 117.46 against the dollar as of 10:28 a.m. in New York from 116.38 on March 3. The Japanese currency weakened to 141.16 per euro from 140.17, a fifth day of losses, and also declined against all the 16 most actively traded currencies tracked by Bloomberg.

Fifty-nine percent of traders, strategists and investors surveyed by Bloomberg on March 3 advised selling the yen against the dollar this week.

The euro retreated from a one-month high against the dollar as a report showed European retail sales fell in February by the most in eight months. The euro traded at $1.2018, from $1.2045 on March 3, after earlier advancing as high as $1.2093.

Welcome to The Forex Trading Review

Welcome to The Forex Trading Review. Let's start off with a basic introduction to forex trading

The currency market is the largest and oldest financial market in the world. It is also called the foreign exchange (forex) market, FX market for short. Basically, forex trading is the trading of different types of foreign currencies.
Previously, foreign exchange trading was mostly limited to large banks and institutional traders. Recent technological advancements have enabled small traders to take advantage of the many benefits of forex trading through the online trading platforms.

The major currencies in the forex market
The currencies of the world are on a floating exchange rate, and they are always traded in pairs Euro/Dollar, Dollar/Yen, etc. About 85 percent of all daily transactions involve trading of the major currencies.

Four major currency pairs are usually used for investment purposes. They are: Euro against US dollar, US dollar against Japanese yen, British pound against US dollar, and US dollar against Swiss franc. This is how they appear in forex charts: EUR/USD, USD/JPY, GBP/USD, and USD/CHF.

If you think one currency will appreciate against another, you may exchange that second currency for the first one and be able to stay in it. If everything goes as you plan it, eventually you may be able to make the opposite deal and exchange this first currency back for second one and then collect profits from it.

A market that never stops
Transactions on the FOREX market are performed by dealers at major banks or FOREX brokerage companies. The FOREX market is active 24 hours a day and dealers at major institutions are working 24/7 in three different shifts. Clients may place take-profit and stop-loss orders with brokers for overnight execution.

Price movements on the FOREX market are very smooth and without the gaps that you face almost every morning on the stock market. The daily turnover on the FOREX market is somewhere around $1.2 trillion, so a new investor can enter and exit positions without any problems.

The fact is that the FOREX market never stops, even on September 11, 2001 you could still get your hands on two-side quotes on currencies. It is the biggest and most liquid market in the world, and it is traded mostly through the 24 hour-a-day inter-bank currency market.

Unlike the futures and stock markets, trading currencies is not centered on an exchange. Trading moves from major banking centers of the U.S. to Australia and New Zealand, to the Far East, to Europe and finally back to the U.S. it is truly a full circle trading game.

Small traders can now tap into the largest financial market in the world
In the past, the forex inter-bank market was not available to small speculators because of the large minimum transaction sizes and strict financial requirements.

Banks, major currency dealers and sometimes even very large speculator were the principal dealers. Only they were able to take advantage of the currency market's extraordinary liquidity and strong trending nature of many of the world's primary currency exchange rates.

Today, foreign exchange market brokers are able to break down the larger sized inter-bank units, and offer small traders like you and me the opportunity to buy or sell any number of these smaller units. These brokers give any size trader, including individual speculators or smaller companies, the option to trade at the same rates and price movements as the big players who once dominated the market.

Resources:
The Forex Center
Forex Video Instruction