Currency traders?

[aristotle]

Great forum by the way. Thanks to hsv.

Does anyone else trade currencies? I trade on fxcm and have enjoyed doing so for the last 5 or 6 years. Currently, I have no open positions, but am waiting for a good time to invest in the USD. The question, of course, is has the greenback hit rock bottom or will the continued trend continue?

Any forex folks out there who want to converse on the subject?

[ErieHog]

I'd expect the dollar to slide a bit more, esp. against the Euro; the ECB decided not to raise interest rates on the 5th, but it's likely in the offing over the summer.

[hog.goblin]

Great forum by the way. Thanks to hsv.

Does anyone else trade currencies? I trade on fxcm and have enjoyed doing so for the last 5 or 6 years. Currently, I have no open positions, but am waiting for a good time to invest in the USD. The question, of course, is has the greenback hit rock bottom or will the continued trend continue?

Any forex folks out there who want to converse on the subject?

Aren't you already heavily invested in the USD by having real estate, bank accounts, etc?  Or are you thinking a more leveraged option position?

[Ragnar Hogbrok]

From what I've gathered (I'm no expert, however), the current downturn we're in coupled with high oil prices will soon deflate the dollar.  Now, as for when this will happen, who knows?  If it were that easy, we'd all be rich.  That said, I believe the dollar will drop a little further before hitting bottom, due to extremely low interest rates and the Fed pumping money into banks.  But, it will recover.  It always does.  And, there will be money to be made when it does!!!

[aristotle]

Well, I have made some pretty good money shorting the USD against the EUR and GBP. I believe the trend is still dollar short, but with recent mention by the FED of raising rates to combat inflation, it may be nearing bottom levels and rife for a bounce back. I believe I will stay on the sidelines unless something drastic happens, and wait out the Presidential election. Policy, particularly the war and energy, will have a great impact on the dollar.

[The Marmot]

Doesnt the gov't need to start lowering our national debt to relly help the dollar rebound?

[ErieHog]

Doesnt the gov't need to start lowering our national debt to relly help the dollar rebound?

No.

[aristotle]

Doesnt the gov't need to start lowering our national debt to relly help the dollar rebound?

It would help. There is little doubt that the deficits are contributing to the dollar's weakness. But it's not the only thing.

[Ragnar Hogbrok]

I've read that the current Fed chairman is a firm believer in weakening the dollar to encourage foreign traders to come to the U.S. and invest cheaply.  The thought was that we'll overcome the weaker dollar with trade surpluses.  We know see how that worked out. 

But, if we did get rid of the debt, that would eliminate our "need" to have a weak dollar to overcome our trade deficits, in theory, allowing the dollar to strengthen.

[The Marmot]

I've read that the current Fed chairman is a firm believer in weakening the dollar to encourage foreign traders to come to the U.S. and invest cheaply.  The thought was that we'll overcome the weaker dollar with trade surpluses.  We know see how that worked out. 

But, if we did get rid of the debt, that would eliminate our "need" to have a weak dollar to overcome our trade deficits, in theory, allowing the dollar to strengthen.

The way I've understood it is our high national weakens the dollar b/c our dollar is based on faith in the government (fiat system), and a high national debt (among other things) decreases overall faith in our governments ability to back up that dollar. Maybe I'm completely off-base here.... if so, let me know, thats why we have this great new forum.

[Ragnar Hogbrok]

The way I've understood it is our high national weakens the dollar b/c our dollar is based on faith in the government (fiat system), and a high national debt (among other things) decreases overall faith in our governments ability to back up that dollar. Maybe I'm completely off-base here.... if so, let me know, thats why we have this great new forum.

No, you're not off base, but the lack of faith in the government's ability to back the dollar is only a piece of the puzzle.  Sometimes, oddly enough, a weaker dollar is good for our economy.  Just not THIS weak, in my opinion.  The dollar dropped too much value and caused oil prices (which are based on our dollar) to rise rapidly with inflation.  The pay raises we get don't come fast enough to keep up with inflation, therefore, we feel the crunch.

Also, with the amount of money the Fed is pumping into the banks' lending system, the dollar value can only go down.  More dollar bills=less value each for each one.  Also, with lower interest key interest rates, it's easier to get your hands on more money, thus filling the market with cash.  Again, more cash=less value for each dollar.

If I am off base, someone let me know.  I've done a lot of reading on this, but by no means am I a financial expert.

[BlackKnightHogFan]

We are in a credit crunch and the Fed has been doing everything it can to keep our banking system afloat.  The discount rate and fed fund rates are at 2%, they have bailed out at least one Investment bank we know of and have opened the discount window to the investment banks.  They are printing money and flooding the system with money to keep it from totally locking down and freezing up sending many firms into bankruptcy and plunging the stock market.  Because of that the dollar is weak.  It will not sustain strength until we are through the credit crunch or it spreads to Europe and the ECB cuts rates.  This happened in the savings and loan crisis in the late 80s as well as to a lesser extent in '94 and '98.  It is what it is but right now we cannot have a stong dollar and get out of the financial crisis we are in or stay out of recession.  The weak dollar helps exports and that is keeping overall GDP in the green thus no recession (technically).

Until the credit crisis is over or it sperads to Europe and the ECB lowers rates expect a weak dollar.  There has been a change in the Fed's tone lately indicating that inflation is more of a concern and an attempt to talk the dollar up.  Remember, even more so with FOREX, that bulls make money and bears make money but pigs get killed.  Don't ever try to call a bottom or a top.  Also, Mass is much more of an expert in this area...I hope he weighs in.

[ErieHog]

We are in a credit crunch and the Fed has been doing everything it can to keep our banking system afloat.  The discount rate and fed fund rates are at 2%, they have bailed out at least one Investment bank we know of and have opened the discount window to the investment banks.  They are printing money and flooding the system with money to keep it from totally locking down and freezing up sending many firms into bankruptcy and plunging the stock market.  Because of that the dollar is weak.  It will not sustain strength until we are through the credit crunch or it spreads to Europe and the ECB cuts rates.  This happened in the savings and loan crisis in the late 80s as well as to a lesser extent in '94 and '98.  It is what it is but right now we cannot have a stong dollar and get out of the financial crisis we are in or stay out of recession.  The weak dollar helps exports and that is keeping overall GDP in the green thus no recession (technically).

Until the credit crisis is over or it sperads to Europe and the ECB lowers rates expect a weak dollar.  There has been a change in the Fed's tone lately indicating that inflation is more of a concern and an attempt to talk the dollar up.  Remember, even more so with FOREX, that bulls make money and bears make money but pigs get killed.  Don't ever try to call a bottom or a top.  Also, Mass is much more of an expert in this area...I hope he weighs in.

The ECB is discussing raising rates, not cutting them, so that's a long way off atm.

[BlackKnightHogFan]

The ECB is discussing raising rates, not cutting them, so that's a long way off atm.

Maybe but from 2003-now we have been from 5.5% to 0% back to 5.25% and now to 2.0%.  If the financial crisis spreads to the European banking system they will be forced to act as we have.  Of course, if you believe in the decoupling theory as they do they think they are fine.  I believe that they will experience a credit crisis of their own soon.  Maybe not as bad as ours but bad enough to lower rates.

[ErieHog]

Maybe but from 2003-now we have been from 5.5% to 0% back to 5.25% and now to 2.0%.  If the financial crisis spreads to the European banking system they will be forced to act as we have.  Of course, if you believe in the decoupling theory as they do they think they are fine.  I believe that they will experience a credit crisis of their own soon.  Maybe not as bad as ours but bad enough to lower rates.

British banks were quick to start write-offs last year, and have been spreading out the impact very well over time.  I really don't expect anything on the US scale anytime soon.

[BlackKnightHogFan]

British banks were quick to start write-offs last year, and have been spreading out the impact very well over time.  I really don't expect anything on the US scale anytime soon.

Nope me either.  I wish you would quit raining on my parade though.  I need to believe that the credit crisis will spread so the dollar will strengthen and maybe our rates and oil will normalize.  I mean come on the ECB is run by a French dude surely he can't be right an they will again need our help to bail them out...right?

[Ragnar Hogbrok]

I heard this morning on WSJ This Morning that inflation has gone up again in the last month.  They are predicting the Fed to raise the key interest rate to counter.  Although a loan will become more expensive, this should strengthen the dollar and oil prices should start to reflect this by going a little cheaper, along with the costs of everything else.  Here's to hoping we're almost outta' this slump.

[aristotle]

If the FED is serious about combating inflation and raising interest rates, a long position in USD may be opportunistic right now. That's what I'm waiting for. Made good money shorting the dollar as it has dropped. Would like to go long and hold there if the FED is going to help the buck out.

[BlackKnightHogFan]

If the FED is serious about combating inflation and raising interest rates, a long position in USD may be opportunistic right now. That's what I'm waiting for. Made good money shorting the dollar as it has dropped. Would like to go long and hold there if the FED is going to help the buck out.

I think the FED will stand pat for at least a couple of meetings.  They have switched their rehortic to help prop up the dollar.  Instead of talking low rates to stimulate the economy they are talking raising rates to combat inflation when, in reality, the fed can't control inflation in commodities and food.  They had to counter Trichet and the ECB and that is the Fed's talking points right now.  I don't believe we are far enough down the road of the credit crisis for the Fed to undertake a major campaign to raise rates.  Too much downside risk to the financial system to do anything major.  Maybe a token .25% before the end of the year but that is all.  I, however, am not an expert and those are just my observations.

[aristotle]

I think the FED will stand pat for at least a couple of meetings.  They have switched their rehortic to help prop up the dollar.  Instead of talking low rates to stimulate the economy they are talking raising rates to combat inflation when, in reality, the fed can't control inflation in commodities and food.  They had to counter Trichet and the ECB and that is the Fed's talking points right now.  I don't believe we are far enough down the road of the credit crisis for the Fed to undertake a major campaign to raise rates.  Too much downside risk to the financial system to do anything major.  Maybe a token .25% before the end of the year but that is all.  I, however, am not an expert and those are just my observations.

These are good points. I have a feeling that inflation will start impacting day to day goods besides oil prices and manufacturing if they don't get it in check. You are correct regarding the rhetoric, I think. That is what made Greenspan so good. He would give those hints as to what to expect, and when the data caused a market correction, he had already weakened the effect by preparing the markets in advance. Bernanke is just starting to learn that sublety I think

But then again, I'm just a novice taking shots in the dark and hoping I'm right.

[Masshog]

If they raise rates next week I will personally come to Arkansas and eat your fedora!!!  Not going to happen.  At least not yet. 

[aristotle]

If they raise rates next week I will personally come to Arkansas and eat your fedora!!!  Not going to happen.  At least not yet. 

Hey, there's Masshog. Been wondering when you might contribute to this thread. Yeah, I think you are right about raising rates. Not yet...but they are leaking the notion of addressing inflation and that's a start. Baby steps, ya know....

[Masshog]

Sometimes, after doing this all day (trading and thinking about trading), I don't have much energy for it.