Forex Mystery – China’s Foreign Reserves Continue To Fall

It has become the great forex market mystery of recent times, as China and it currency based movements continue to baffle. Between Spring 2014 and Spring 2015 China’s currency reserves have tumbled, but it seems that no forex analysts can figure our why. Looking at the stats for Q2 2015, the forex reserve dipped by $36.2 billion, making for a total dip of $3.99 trillion over the past 12 months, this is according to the officially published data. The problem is that the reason for downturn is hard to pinpoint.

 

Chinese one-hundred yuan banknotes are arranged in a bowl for a photograph in Hong Kong, China, Tuesday, Dec. 10, 2013. The yuan rose to the strongest level in 20 years today on signs the Communist Party is already delivering on its November pledge to give markets a more “decisive” role in the world’s second-largest economy. Photographer: Jerome Favre/Bloomberg

Chinese one-hundred yuan banknotes are arranged in a bowl for a photograph in Hong Kong, China, Tuesday, Dec. 10, 2013. The yuan rose to the strongest level in 20 years today on signs the Communist Party is already delivering on its November pledge to give markets a more “decisive” role in the world’s second-largest economy. Photographer: Jerome Favre/Bloomberg

While only rumours at the moment with no solid evidence to back them up, some analysts believe that traders are moving their money away from China because of a lack of confidence in the country’s economic standing. It seems that as the US dollar rises China seems to suffer from a forex standpoint, with the reserves dwindling as a result. At this point it is hard to estimate just how much China has left within its reserve coffers, this is because the Chinese government as always remain highly secretive on matters. While what they do publish is quite often criticised for it lack of reliability. It is this uncertainty that is wreaking havoc of the forex market in 2015.

 

Looking at third-party assumptions when it comes to the Chinese foreign reserves, with Goldman Sachs offering up the most fleshed out vantage point. They believe that by the close of July 2015 there was around $200 billion remaining in the country’s coffers, something that a State Administration of Foreign Exchange spokeswoman would later deny. JPMorgan Chase have also chimed in with an opinion through Chief China Economist Zhu Haibin, who feels that that cross-border capital flows and direct net foreign investment are having a determining effect on China’s forex market impact.  Speaking to news provider Caixin, he spoke on how all-major determining factors point towards the yuan not appreciating as expected. As this is the case it would surely make sense for the country to hold forex deposits and work to reduce any forex debt, yet China seem to be veering away from such. By all accounts the People’s Bank of China would rather see increased private holding investments that investment via forex. Caixin also spoke to two other leading economists who reaffirmed this potential theory.

 

What does this mean for China and its Forex market influence moving forward? Well it is widely agreed that the increase in forex holdings by large firms will continue to contribute to the fall of the People’s Bank of China forex reserves. China is seemingly looking to address the problem on the ground by creating new institutions and banks to back further new infrastructure projects. By creating billion dollar developments through brand new entities there is the hope that it will stop the rot when it comes to the Chinese forex reserves, as it will reignite interest in the yuan. However, many are unsure of just how effective this will prove to be moving forward.

The Grand Budapest Bank (EUR/HUF)

Right now, all eyes are on the Greek debt crises and its resolution. However, while all financial eyes are on Athens and Brussels another EU problem is brewing in Hungary. The Hungarian banking crises began during the housing bubble. At the time, the Swiss Franc was pegged to the Euro and it was less expensive for Hungarian banks to fund mortgages with Swiss Francs. After the bubble burst and the Eurozone recovery failed to take hold, the ECB set out to weaken the Euro. The Euro plunged to record lows against major currencies.

In the last quarter of 2014, foreign currency mortgage payments had become increasingly expensive as a result of the MNB’s weakening of the Forint[i]. The populist administration of recently re-elected Prime Minister Orban[ii] ordered banks to refund over £2.66 billion for unfair lending practices. The Hungarian Parliament approved legislation making the refund law[iii]. During this time, the Hungarian National Bank decided to maintain its benchmark at 2.1% set in July of 2014. This was the last of a two year easing cycle. However, the sequential easing weakened the Forint causing foreign currency mortgage payments to edge even higher.

EUR HUF July 10

Hence, the Hungarian private sector banking system was already extremely stressed months before the Swiss decoupling from the Euro. It should be noted that the private banking sector is 60% privately owned, (a good portion of that foreign), and 40% owned by the state. So by the end of 2014 as the MNB, the Hungarian government, courts and banks struggled to stabilize the financial sector, unbeknownst to anyone, Hungary was on a head-on collision course with the Swiss ‘Black Swan’ event.

Meanwhile, in a determined last effort, the ECB President Draghi had promised a bond buying program beyond all expectations.  Sovereign yields across the Eurozone crashed through the zero bound. This did not go unnoticed by the Swiss National Bank. The SNB vigorously defended its Euro pegged export economy, swapping Euros for Francs until it was no longer viable. On 15 January, the SNB bailed on the Euro altogether. Not only did the Euro plunge vs the Franc, but so did the non-Eurozone currencies of EU members, such as Hungary. The loans financed in Swiss France became unaffordable, overnight[iv].

Remarkably, the Forint continued to strengthen vs the Euro, from the 15 January 52 week high of 327.67 to the Euro, toward its April low of 295.583 to the Euro; a 9.79% gain. MNB managing director Marton Nagy saw no need for the MNB to respond to Swiss Franc strengthening[v]. It needs to be noted that the MNB ‘base rate’ had last adjusted down to 2.10% in July of 2014. On 23 January the ECB announced its €1 trillion (£719.4 billion) bond purchase program. EUR/HUF dropped from its 52 week high of 327.67 per Euro to support at 309.54, a 5% decline in a week. The yield on the Hungarian 10 Year +BB sovereign bond fell to 2.86% from 3.04%. On 27 January, MNB signaled that although it was maintaining the 2.1% two week deposit rate, that more liquidity would eventually be needed[vi]. A few weeks later, the MNB doubled its bank bailout program to £1.234 billion to stimulate GDP growth. The MNB would resume its easing program 24 March, lowering the two week deposit rate to 1.95%

EUR/HUF finally found support at its 52 week low of 295.583 Forints to the Euro on 15 April and reversed from there. The MNB cut rates again to a new record low, 1.80% on 21 April. It was around that time that the ECB was alerted to possible banking irregularities, announcing that the MNB would be monitored closely for any funding of the government by the MNB; a prohibition under EU regulations. It was stated: “…Given the multitude of programs, their scope and their size, these programs could be perceived as potentially in conflict with the monetary financing prohibition, to the extent that they could be viewed as the [central bank] taking over state tasks or otherwise conferring financial benefits on the state[vii]

With increasing GDP and inflation expectations, reality finally reached currency markets and the Forint steadily weakened. More rate cuts followed on 26 May to 1.65% and on 24 June to 1.50%. These cuts were made in spite of increasing inflation expectations. Also, MNB switched its main policy tool 2-week deposit rate to the 3 month deposit rate, effective September 2015.

What are the possible outcomes? No matter how the Greek debt resolution goes it will cost the EU in some way. Most likely the Euro will experience further weakness against other majors. Hungary, on the other hand still has a serious dilemma of its own. It’s now under the watchful eye of the ECB, has a major stake in a troubled banking system whose major stakeholder are foreign. All the while, inflation seems to be accelerating. Further, monetary policy seems increasingly influenced by government policy. The existing plan to swap foreign currency loans for Forint loans, although remarkably successful, is bound to be inflationary at some point. Although, the MNB has given no indication it will reduce the two week deposit rate further, it will have a higher rate to work with when it switches its main policy tool to the 3 month deposit rate[viii].

The question becomes whether the MNB can get ahead of inflation quickly enough, if it should accelerate suddenly. If the Greek-EU standoff is resolved, it will strengthen the Euro at least for a while. If not, a ‘flight to quality’ might make the higher, but risker Hungarian deposit rates a ‘temporary haven’ rather than near zero or negative Eurozone deposit rates.

Mike Scrive

CFDsspread betting and FX can result in losses exceeding your initial deposit. They are not suitable for everyone, so please ensure you understand the risks. Seek independent financial advice if necessary. Nothing in this article should be considered a personal recommendation. It does not account for your personal circumstances or appetite for risk.”

[i] Forbes 29-7-2014
[ii] Bloomberg 12-9-2014
[iii] Reuters 8-6-2014
[iv] BBC 20-1-2015
[v] Hungary Today 22-1-2015
[vi] Bloomberg 27-1-2015
[vii] NASDAQ 20-4-2015
[viii] Bloomberg 2-6-2015

How to Find the Right Forex Broker?

If you run in investment circles odds are you won’t be able to go a day without someone mentioning how the forex markets are doing. Forex is no longer the little brother of the stocks and shares market that it once was, it is now entity all in its own right. It has now become easy to get involved too, but finding the right forex broker to help you along the way can be a little tricky. The following looks at how you can find the right forex broker for your situation.

Financial Certification

The popularity of forex has seemingly opened the door to any and every Internet scammer who is out to get their hand on your money. It means if you want to get involved in forex trading then you need to be extra diligent. Before signing up to a forex broker take a long hard look at their credentials, and never sign-up to a brokerage service that isn’t accredited by a respected financial institution such as the Financial Conduct Authority (FCA).

Industry Reputation

It should go without saying, but the forex broker you choose should have a positive reputation in the industry. Take the time to read customer reviews to see how others view your perspective forex broker. If the forex broker has been critically and commercially panned, it is probably best that you don’t put your trading future into their hands.

Costs

You will want to make sure that the forex broker you choose doesn’t end up costing you an arm and a leg. It isn’t just the newcomers who get stung by hidden costs either; they can even catch out the most hardened of trading veterans. Ensure that you don’t get hit with any nasty surprises, make sure that you thoroughly read any agreement you sign and ask to have all costs detailed to you beforehand.

The last thing you need is to find that your forex broker isn’t available when you need them. If you trade forex odds are you are going to be doing so at unsociable hours, but what use is it if you won’t have your brokers support during that time. Speak to your forex broker about when you are likely to need their support, if they can’t offer such, you may be best be looking towards another firm.

Information

Everyone enters the forex market with a different trading strategy in mind. Some like to act on instinct, while others like to stick with the statistics. If you are the latter you will need to know that your forex broker can have the right information on hand for you.

Demo Account

If you are new to the world of forex trading, you will need to find a forex broker who can offer you demo software. Demo accounts can allow you to get your trading skills up to scratch and make sure that you don’t get thrown in at the deep end unnecessarily. A demo account may not seem like much, but all the best brokers should offer you one.

Swiss franc uncapping

Was Everest The Biggest Victim Of The Swiss Franc Uncapping?

The Swiss franc was once the epitome of reliability, as it was seemingly unshakable due to the control measures instituted by the Swiss National Bank. However, during January 2015 the SNB changed the world of forex forever, when they uncapped the Swiss franc and removed said control measures. Most of the headlines went to the aftermath of such event and the companies that suffered because of it, but it wasn’t just brokerage firms that were hurt. In fact, it was a hedge fund that was clearly hurt more than anyone else from a financial perspective.

Marko Dimitrijevic is known the world over for his aggressive gambles when it comes to emerging markets. He carried this “big risk, big reward” philosophy into Everest Capital’s Global Fund and it clearly proved to be too much risk in this case. The SNB’s decision to restore “free float” to the Swiss franc caused turmoil and tore the fund apart in many ways.

On December 31st, hotly anticipating the New Year, Everest Capital’s Global Fund would enter 2014 with $830 million in assets under its belt. Sadly, this anticipation would quickly be dashed, as the unexpected move from SNB would hammer the fund. Fund operator Dimitrijevic had a risky bet in place that the Swiss franc would fall, but it wouldn’t be long before that bet would come back to bite him. This bet would leave the fund overly exposed to the events that would unfold during January 2015. As the Swiss franc price would sky rocket and show no signs of slowing down, it would strip away pretty much every penny the fund had. After much deliberation Everest decided that the fund was unsustainable. Everest will still operate out of its Miami base, continuing to run and control the firms other $2 billion worth of assets, the majority of which have little to no exposure to the Swiss franc.

The story of Everest Capital’s Global Fund is ultimately one of rise and fall. Starting out life in 1991, the Global Fund earned investors an average annual return of 12.3% after charges, an impressive figure to say the very least. After years and years of consistent success, it has been ended by a single incident of mismanagement. However, Everest Capital’s Global Fund didn’t stand alone in their troubles, as other hedge funds would also suffer. Discovery Capital Management was another firm that were hit hard by the Swiss franc price hike.

When looking back at history, there will be many good things to remember about Everest Capital’s Global Fund. They invested well within Swiss sectors and had no aversion to emerging markets, while they were also willing to take a gamble when necessary. Those who timed their entrance and exit to the fund made good money, but what Everest Capital’s Global Fund will be remembered for most is their ending. Almost $850 million in assets evaporated in a matter of days due to a single global event, an incident that many investors will remember long into the future.

Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.

Alexander Bowring is a London based writer and a Southampton Solent University Screenwriting graduate. He has worked alongside TV personality and Telegraph feature writer Alison Cork, whilst also having produced content for ITV, This Morning, Canvas8, Who’s Jack, Alison at Home, and Bonallack & Bishop Solicitors. Alexander also has a keen interest in investments.

Forex Trading – What do you need to get started?

Forex may seem like a daunting arena to trade within, however it may not be as tough as you originally thought. More and more people are getting involved with forex, as should you approach forex trading properly there is definitely plenty of profit to be made.

Do Your Research

Even though the forex market is becoming increasingly accessible, success is definitely not guaranteed. Before you start forex trading you would have probably worked hard to raise a pot of capital to play around with, so the last thing you want to see is this money disappear. Treat forex like any other financial transaction and before you agree to get involved you need to be fully prepared for all possible outcomes. Start the process early by researching the field. There is a whole host of free educational resources out there, both physical and web based. Many brokers also offer demo accounts to help newcomers to forex learn the field. Outside of the educational aspects of forex, you will need to develop a financial savvy and economical judgement. However, those will come to you in time and they aren’t something you can necessarily learn from a resource.

Finding a Broker

Plain and simple, you can’t trade forex without a broker. Brokers vary in quality, price, and service, so it is important that you do your research and find one that suits your forex trading style. Some brokers you come across will be forex trading exclusive, while others will be more multi-faceted. Obviously if you have various investments in other markets then the latter might be better suited to your situation. Whatever type of broker you choose, they should be FCA regulated at minimum. They should also be there for you when you need them, so enquire about their customer service options. Are they available around the clock? Are they not available evenings and weekends? All this information should be a factor when you decide which broker to use.

Take it for a Test Drive

The first broker you sign up to won’t necessarily be the one you eventually stick with. After selecting a broker, get involved with the software and platform straight away to get a feel of how it works and to see if it is the right platform for you. Use the brokers demo account and see if the platform is suitable. If it isn’t then you shouldn’t worry too much, you can always go back to the drawing board as there are plenty of other forex trading platforms out there.

Final Thoughts

The forex market is undoubtedly an exciting place to be, but during your early days forex trading you may be left feeling a little overwhelmed. You should remember that getting started in forex isn’t as tough as it may seem. Remember all the aforementioned and you should be able to get off on the right foot, with success hopefully coming sooner rather than later.

Can you Trade Forex for a Living?

It doesn’t matter whether you are a white-collar worker or a blue-collar worker; everyone is looking for a way out of the daily ‘rat race’. More and more people are turning away from traditional work in order to pursue home based earning via the form of online trading. The form of trading that is attracting the most attention is forex trading, but can you trade forex for a living? Read on to find out.

What is Forex?

Forex trading (sometimes listed as just FX trading) is a form of investment that has strong connections to the foreign exchange markets. It places focus on the exchange of international currencies in attempt to make profit. The forex market actually qualifies as the largest form of investment market in operation, as it involves almost all the countries around the world. When it comes to forex, all trading is handled in an ‘over the counter’ capacity, which helps separate it from traditional forms of trading.

Operating Times

What makes forex so appealing as an avenue of investment, especially to those who wish to do it for a living, is that the market never sleeps. It means if you wish to leave the 9am to 5pm behind to trade forex for a living, then odds are you are going to enter a world that operates round the clock. This means that you can create and operate within your own customised work schedule and will no longer be tied down to a schedule that is dictated to you by an employer.

Trading Levels

Where forex differs from other trading markets is that it is split up into several different access levels. What level you have access to is all dependent on how much you can and are willing to invest. The highest level that can be accessed is the Interbank Market. To reach this you need to not only have a mountain of cash backing you, but also expert knowledge of when it the best time to trade forex and how to secure a profitable deal more often that. Interbank Market is the considered the pinnacle level and such trickles down from there, with all other levels largely related to funds available and prior forex trading success.

Final Thoughts

The days of having to force yourself into a workplace to make money are slowly becoming a thing of the past, as many continue to look for alternative money making opportunities, Forex trading has become a way from many to take control of their finances and assume full responsibility for their earning potential. If you are asking if you can trade forex for a living, the answer is definitely yes, but it isn’t as simple as logging onto to a trading platform. Trading forex for a living requires more than just a desire to do so, should you want to trade forex a living you need to brace yourself for the hours of intense struggle that lie ahead. If you are ready for risk and are willing to make brave decisions then you may find that trading forex for a living is a viable option for you.

Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.

Alexander Bowring is a London based writer and a Southampton Solent University Screenwriting graduate. He has worked alongside TV personality and Telegraph feature writer Alison Cork, whilst also having produced content for ITV, This Morning, Canvas8, Who’s Jack, Alison at Home, and Bonallack & Bishop Solicitors. Having a keen interest in investments, Alexander has been working for a broker house as a freelance copywriter since May 2014.

Is it the right time to invest in Apple shares?

When you count down the top-ten most innovative companies in the world, Apple would come near the top of that list almost every time. Since the 1970s, Apple have revolutionised the way people view both home and mobile technology. Innovation has become an integral part of their business model and has helped push their stock price up in recent years. Apple shares offer investors an all-round appealing investment, but should you invest in Apple shares? Read on for more information.

Cost

In the past, should you have wanted to invest in Apple shares you have had to part with a pretty penny in order to do so. However, a rare window has opened up that means people can get hold of them cheaper than expected. The iPhone 6 and Apple Watch announcement of summer 2014 wasn’t exactly what people were expecting. Following the usual bump in share price, it dipped to the lowest point since 2012. It represented a 20% drop and even though it still isn’t cheap, it is definitely discounted. Should you invest in Apple shares during fall 2014, you may be getting a great deal.

Portfolio

Apple stocks are a pricey acquisition, which means they are going to be a stock that makes up the backbone of your portfolio. It isn’t going to be a stock that can be flipped for a quick profit, nor can you factor it into the part of your portfolio that is going to provide you with short-term gains. When you choose Apple it is going to a stock that will more than likely provide results over the long-term. The question you must ask yourself is should you invest in Apple shares, are you going to be able to find a place for Apple shares in your portfolio? Or will you have to sacrifice one of your premium stocks in order to do?

Understanding the Product

It sounds obvious, but being a user of Apple products can actually make you more knowledgeable about the brand when you choose to invest in Apple shares. The company prides itself in secrecy regarding product development; making predicting what is coming in the future hard for an outsider. However, consistent users of Apple products can predict what is coming the future, as they match up hardware and software advances with iOS compatibility and release date timelines. Obviously, the deep financial performance of the brand will always be out of reach, but estimation can go a long way in predicting the performance of Apple products in the pipeline.

Final Thoughts

There is plenty to consider should you want to invest in Apple shares, with the aforementioned arguably being the most important. But, the be all and end all of any decision will always rest on the fact that Apple is a global powerhouse, as such their shares command global powerhouse type of money to buy. If you can afford to part with such then Apple represents a smart investment, if you can’t it may be worth directing your attention elsewhere.

Could I Profit From Forex Trading or Alibaba Stocks?

Many people considering investing in Alibaba stocks are also interested in learning how to trade Forex. ‘Forex’ means Foreign Exchange, and there are many different Forex markets in operation around the world. In fact, the Forex market is referred to as being 24/7, as currencies are always being traded at one point or another in various time zones around the world. This is not the case with Alibaba stocks, which would be traded within normal working hours.

The Forex market appeals to those who could also be thinking about buying or selling Alibaba stocks for several reasons. The accessibility of the markets, as noted above, is one benefit for busy traders who may also be working full time trading Alibaba stocks as well as other stocks. At the same time, Forex is leveraged and thus initial deposits can only be a fraction of the value of the trade. Another appealing factor is the variety one encounters on the Forex markets, as so many different currency pairs can be traded.

That said, asking a question such as ‘Could I profit from Forex trading?’ to someone who has purchased Alibaba stocks is not one which is easily answered. Ask any Alibaba stocks trader who has previously had their fingers burnt through a trade which went wrong and they will tell you that the financial marketplace, is, just like the sea, a fickle mistress. In particular, the range of factors which can affect currency values – war, famine, politics, economic change, are so vast that currencies can increase or decrease in value rapidly.

To profit from Forex trading, or indeed to profit from Alibaba stocks, you would need to have a good understanding of the world news, how financial trading works and you also need to be able to make accurate predictions. Basically, you would need a crystal ball. As such, it is most wise to go into Forex not expecting to make a substantial profit for some time, if ever. You will need to learn the ways of the market place and to teach yourself patience and perseverance, to even stand a chance of making money. The same can be said to anyone reflecting on the idea of dealing Alibaba stocks.

Risk warning: Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.

How to Invest in Alibaba Shares

Are you hoping to invest in Alibaba shares, but you are confused as to what steps are required to do so? If so, this short guide will be of help to you. Read on to find out exactly what you need to do in order to invest in this e-commerce company.

1. Research the company: Before you begin to invest in Alibaba shares you need to find out as much information as is possible about Alibaba. How are they currently performing and how are they expecting to perform in the coming year? Are there any factors which could impede their progress or boost their recovery? These questions and more should be answered.

2. Find out about trading: If you are new to the world of shares and stocks then it will benefit you to learn about how financial markets operate, how shares are bought and sold and how a broker operates as a middle man. Being thus prepared, you will better understand the trading process when you begin to buy or sell Alibaba shares.

3. Work out how much you would like to trade: You may be trading as a hobby, or trading may be about to become your full time job. Either way, being sure of your finances and carefully determining how much money you can spend on the trades when you opt in or out of Alibaba shares is sensible.

4. Consult a brokerage: Using a broker to sell and buy Alibaba shares on your behalf is a must-do on your trading list, so get searching. Trust, experience and excellent standards of customer service are the things to look for.

5. Watch the markets: Be vigilant about reading the financial newspapers and watching online forums relating to the markets you are interested in trading on. Those in the know will be those getting ahead, after all.

6. Make your own decisions: Yes, your broker is there to help and may be allowed to give you trading advice on Alibaba shares, if they are so permitted by the Financial Conduct Authority. Yet this does not mean they are necessarily right. It is better to make your own trading decisions.

7. Exhibit self control: If you experience some good fortune with your first investment in Alibaba shares, then you will be pleased, naturally. However, this doesn’t mean you should then throw yourself into another trade straight away. Bide your time and guard your money.

Risk warning: Spreadbetting, CFD trading and Forex are leveraged. This means they can result in losses exceeding your original deposit. Ensure you understand the risks, seek independent financial advice if necessary. The value of shares and the income from them may go down as well as up. Nothing on this website constitutes a solicitation or recommendation to enter into any security or investment.