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Sunday, April 13, 2008

Who is participating in forex market trades?

The forex market is all about trading between countries, the currencies of those countries and the timing of investing in certain currencies. The FX market is trading between counties, usually completed with a broker or a financial company. Many people are involved in forex trading, which is similar to stock market trading, but FX trading is completed on a much larger overall scale. Much of the trading does take place between banks, governments, brokers and a small amount of trades will take place in retail settings where the average person involved in trading is known as a spectator. Financial market and financial conditions are making the forex market trading go up and down daily. Millions are traded on a daily basis between many of the largest countries and this is going to include some amount of trading in smaller countries as well.

From the studies over the years, most trades in the forex market are done between banks and this is called interbank. Banks make up about 50 percent of the trading in the forex market. So, if banks are widely using this method to make money for stockholders and for their own bettering of business, you know the money must be there for the smaller investor, the fund mangers to use to increase the amount of interest paid to accounts. Banks trade money daily to increase the amount of money they hold. Overnight a bank will invest millions in forex markets, and then the next day make that money available to the public in their savings, checking accounts and etc.

Commercial companies are also trading more often in the forex markets. The commercial companies such as Deutsche bank, UBS, Citigroup, and others such as HSBC, Braclays, Merrill Lynch, JP Morgan Chase, and still others such as Goldman Sachs, ABN Amro, Morgan Stanley, and so on are actively trading in the forex markets to increase wealth of stock holders. Many smaller companies may not be involved in the forex markets as extensively as some large companies are but the options are stil there.

Central banks are the banks that hold international roles in the foreign markets. The supply of money, the availability of money, and the interest rates are controlled by central banks. Central banks play a large role in the forex trading, and are located in Tokyo, New York and in London. These are not the only central locations for forex trading but these are among the very largest involved in this market strategy. Sometimes banks, commercial investors and the central banks will have large losses, and this in turn is passed on to investors. Other times, the investors and banks will have huge gains.

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Saturday, April 5, 2008

Next Week Ringgit To Be Rangebound Against U.S. Dollar



FOREX: Ringgit vs U.S. Dollar

The ringgit is likely to be rangebound against the U.S. dollar next week, with market participants staying on the sidelines due to ongoing fears over the U.S. subprime meltdown, a dealer said.

He expects the local unit to move within a tight range of between 3.1880 and 3.1950 against the greenback next week.

"Market players are staying away from lower yield currencies as the U.S. economy moves closer to a recession due to the deepening subprime mortgage woes," he said.

On a positive note, he expressed optimism over the near-term outlook of the ringgit given rising expectations that the U.S. Federal Reserve will cut its key interest rate by as much as 50 basis points at the next policy meeting scheduled for the end of this month.

"This would further weaken the U.S. dollar, prompting players to invest in countries where interest rates are higher so as to reap better returns on their investments," he said.

He also said that Bank Negara Malaysia will likely allow the ringgit to strengthen further to RM3.10 per U.S. dollar by year end after the 6.7 percent and 7.1 percent gains in 2007 and 2006 in order to contain inflationary pressures.

Noting that Malaysia’s benchmark interest rate is currently at a premium to that of U.S., the dealer said Malaysia's overnight policy rate could be kept steady so that the interest rate differential factor will remain in the ringgit’s favour.

"This will provide a good injection for the further strengthening of the ringgit along with other Asian currencies in the near term," he added.

He added that the strengthening of the local currency will also be in tandem with the expected continued rise of the local stock market.

On a week-to-week basis, the ringgit appreciated against U.S. dollar at 3.1920/1940 compared with the previous Friday's 3.1950/2000.

It was higher against the Singapore dollar at 2.3045/3090 from 2.3142/3197 and was also stronger against the Japanese yen at 3.1155/1187 from 3.1928/1984.

Against the British pound, the ringgit however, weakened at 6.3827/3896 from 6.3772/3882 but it appreciated against the euro at 5.0137/0178 from 5.0344/0432 previously.

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