With the global economy worsening and on-track for a world-wide recession – see yesterday’s Forex News and Rumors for an update from the International Monetary Fund (IMF) - we may be witnessing the end of the yen carry trade for the foreseeable future. The reason for this is quite simple – as the G7 countries continue to lower interest rates, the advantages of carry trades based on the yen are greatly diminished.

Essentially, a carry trade is a transaction that seeks to profit on the interest differential between two currencies. One of the most common carry trades involved borrowing Japanese yen which has had a very low interest rate for mo... Read more »

Filed under: FXCommentary

Former Federal Reserve Chairman Alan Greenspan has spent a lot of time on the road since handing the reigns of the Fed over to Ben Bernanke back in February of 2006. First he wrote this big, heavy book and did the talk show circuit to promote it, then he launched the “It’s Not My Fault” tour where he told anyone willing to listen that he was not responsible for the world’s financial ruin. Now it seems, he has kicked off the “Mea Culpa” tour. Get your tickets now – they’re going fast!

On October 28th, Greenspan was called before the Government Oversight... Read more »

Filed under: FXCommentary

The Bank of England cut interest rates today. This in itself was not unexpected as market watchers were predicting, on average, a reduction of half a percent. This was based mostly on the fact that the Bank's Monetary Policy Committee had never before approved a reduction greater than fifty basis points.

Yesterday, I wrote that maybe it is time for the Bank to make a little history and to provide England's battered economy with greater relief - maybe even a full percent cut.

... Read more »

Filed under: FXCommentary

As the grim economic news continues to lead the local newscasts, the European Central Bank and Bank of England are both expected to announce interest rate cuts tomorrow. In the past two weeks we have seen rate cuts from several of the "big seven” currencies with Australia finally getting in on the act on Monday when the Reserve Bank of Australia (RBA) cut seventy-five basis points from the Cash Target Rate lowering it to 5.25 percent.

Last week,... Read more »

Filed under: FXCommentary

With a rate cut to be announced today at 2:15 pm EST essentially a forgone conclusion, the only question remaining is how deep will Bernanke go? Already sitting at 1.5%, the Fed is rapidly running out of room for future actions and some are betting for a full one percent reduction to "shock" the entire system into action. This could be an "all or nothing" play.

The White House also fired a shot across the bow yesterday with White House press secretary Dana Perino telling the banks in no uncertain terms to stop hoarding the money provided through the taxpayer-funded rescue plan and to start lending. I’m paraphrasing a bit here, but I believe I have accurately captured the essence of Perino’s message.

The actual quote is more ... Read more »

Filed under: FXCommentary

A few weeks back, Warren Buffet ended Bill Gates’ decade long hold on the title of World’s Richest Person when Forbes Magazine estimated his net worth at $62 billion compared to Gates’ $58 billion. Gates actually fell to third place just behind Carlos Slim Helú who as Mexico’s telecommunications czar, has amassed $60 billion.

While everyone who pays attention to this sort of thing already knows that these guys have a lot of coin, it was a little article tucked into last Friday’s New York Times that made some heads turn. After several weeks of seemingly daily record losses on the global markets with American exchanges particularly hard hit, Warren Buffet wrote an op-ed piece that stated emphatically in the title of the art... Read more »

Filed under: FXCommentary

Today the Mexican Central Bank (Banxico) auctioned $400 million at an prorated 13.1204 pesos per dollar. This latest auction rounds up the $1.9 Billion offered to the market today. The morning's auction was at a prorated 12.9565 pesos per dollar. Last week Banxico sold off $8.9 Billion dollars to keep the local currency under control using the nation's record foreign exchange reserves.

Banxico's Governor Ortiz gave a television interview in which he outlined that the auctions will continue but are looking for other alternatives as they seem to be nearing their end. The $84 Billion in Foreign Reserves will not be enough to stave off the market forces from depreciating the peso

Mexico's country risk has increased by 35 points... Read more »

Filed under: FXCommentary

So far today there have been three auctions. A $3 Billion, a $400 Million and another $3 Billion auction.

Updating the previous Mexican Peso (MXN) post the Mexican Central Bank has increased the amount of the daily auctions from $400 Million up to $3.5 Billion. Record gains in Oil exports, Mexico's largest export, built up the country's foreign reserves to $84 Billion, and Cbanker Ortiz has hinted that they will use it to try to give the peso some stability.

The previously announced $400 Million auctions did not have any takers, and were announced desert yesterday due to the high price of the USD. Corporates were not happy with the am... Read more »

Filed under: FXCommentary

A good example of the volatility of Emerging Markets was witnessed today by Mexican Peso Forex Traders. The Mexican Peso (MXN) reached a record low versus the USD this morning at 8:00 am EDT. There were different factors that pressured the Mexican currency to depreciate and their combined effect resulted in the spike shown in the graph.

... Read more »

Filed under: FXCommentary

Turns out, Jimmy Carter is to blame for the subprime chaos and resulting credit crunch – I knew it all along! In truth, Carter may have planted the seeds for what we regretfully reap today, but there were plenty of others along the way that contributed to today’s crisis.

Way back in 1977, President Jimmy Carter brought the Community Reinvestment Act (CRA) into law. This act required mortgage lenders to qualify Americans with lower incomes that had previously been earmarked as too great a risk. Harmless enough, right? Isn’t this the “American Dream” after all?

Then it was President Bill Clinton’s turn to play political one-upmanship. Clinton’s Secretary of Housing and Urban Development, Andrew Cuomo, pressured ... Read more »

Filed under: FXCommentary