USA FOREX

Economists at Westpac issued a warning against calls for the Reserve Bank to lower the official cash rate (OCR) in a bid to weaken the New Zealand dollar.

Last week the New Zealand Manufacturers and Exporters Association called for the Reserve Bank to lower the OCR immediately to alleviate the strain of the NZ dollar's strength on exporters.

But today Westpac economists Brendan O'Donovan and Sharon Zollner said calls for a lower OCR to offset the exchange rate were misguided.

The relationship between the OCR and the currency appeared unstable, and it was not clear the New Zealand currency was overvalued, the economists said.

Rates below the current low 2.5 percent for the OCR would fuel the sources of economic recovery now unfolding, including higher net migration, increased residential construction, higher house prices, and consequently a potentially reinvigorated consumer.

That could potentially lead to a higher, not lower, currency, the Westpac economists said.

"It is useful to keep in mind that the currency is always where it is for a reason."

The NZ dollar's trade weighted index recently of 62.2, compared with an average of 60.8 since 1985 and 61.6 since 1995.

"It is very close to its average level even though NZ's terms of trade (pre the big August Fonterra auction) are 14 percent above their post-1995 average, and New Zealand's economy has come through the global downturn better than most," the economists said.

"The currency may well be telling us something. If the expected conditions that it is based on prove to be false, it will unwind of its own accord."

NZPA

us Trade Foreign

Learn to Trade Foreign Currency - One Crumb at a Time

It requires diligence and discipline to learn to trade foreign currency. It doesn't matter whether you're a seasoned pro or after a beginner's forex trading training course. Currency trading is about having your finger on the pulse of the market, specializing in select relationships, and attacking the market ruthlessly and fearlessly when opportunity strikes. Sound like fun to you? Then read on.
Contents at a Glance

1. Why There is Always Opportunity to Make Money Trading Foreign Currency
2. In a Purely Logical World Currency Cross Rates Always Make Sense
3. Learning to Trade Foreign Currency

4. The Key to Learning to Trade Foreign Currency with Leverage
5. Automated Trading Programs Trade Currency Faster Than Us
6. Did You Learn about Trading Foreign Currency?

more...
Contents at a Glance

1. Why There is Always Opportunity to Make Money Trading Foreign Currency
2. In a Purely Logical World Currency Cross Rates Always Make Sense
3. Learning to Trade Foreign Currency
4. The Key to Learning to Trade Foreign Currency with Leverage
5. Automated Trading Programs Trade Currency Faster Than Us

6. Did You Learn about Trading Foreign Currency?
7. Open a Trading Account Today
8. Books on Foreign Currency Trading
9. Forex Trading Blog
10. Other Day Trading Investment Tutorials

less...
Why There is Always Opportunity to Make Money Trading Foreign Currency
Trading Currency Cross Rates Creates Momentary Arbitrage

Trading foreign currency may be a little confusing for the novice investor but hear me out and I'll try to make it more plain for you. Below is a chart detailing the relationships between three currencies (Yen, US Dollar, and Euro) from July of 2008 to July of 2009.
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In a Purely Logical World Currency Cross Rates Always Make Sense
Foreign Currencies Trade in Pairs Called Cross Rates

You'll note in the chart above that there appears to be some sort of synchonization between the movements of the values of the currencies. For example, when the Euro/Dollar cross rate is rising (dollar is strengthening), and the Yen/Dollar is flat, one would expect to see the Yen/Euro falling. That is precisely what we see going on in this chart. It's logical. One should not be able to sell a euro, buy a dollar, then sell the dollar and buy a Yen, only to sell the Yen immediately to buy 2 euros. That simply wouldn't make sense would it? How can anyone expect to sell one euro and then an instant later get 2 back (pardon the exaggeration here) without adding any value to the initial euro sold? It doesn't make sense does it? Well I can tell you it happens every - single - day.
Learning to Trade Foreign Currency
Chart 2: Implied Cross Rate vs. Actual Market Cross Rate

Take a look at a second, slightly different chart. We're still analyzing the cross rates between Yen, US Dollar, and Euro, only now we're only interested in the Actual Yen/Dollar rate, and the cross rate for the Yen/Dollar implied by the Yen/Euro and Euro/Dollar cross rates.
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What I've done here is plotted the implied Yen/Dollar cross rate (made by trading euros, dollars, and Yen) against just trading the dollar for Yen directly. There is virtually no different between the two, yet what are the large green spikes?

forex Banks

Banks slash dollar interest rates

Banks are slashing US dollar deposit and loan interest rates to solve stagnant capital movement and encourage business and investment, said a senior State Bank official.
A new US$ deposit interest rate ground is set up, when state-owned banks and Vietcombank officially lower US$ deposit interest rates to 1.5 percent per annum at the highest. (Photo: SGGP)

Since June 1, many banks, such as the Bank for Investment and Development (BIDV), the Bank of Agriculture and Rural Development(Agribank), the Bank for Industry and Trade(Vietinbank) have reduced dollar deposit and loan interest rates by 1.5 percent and three percent per year respectively, down by 0.4 to 0.6 percent compared with previous interest rates.

Vietcombank on June 1 adjusted rates, including a cut to 1.3 percent for six-month deposits, 1.4 percent for nine-month deposits and down to 1.5 percent for 12-month deposits. The bank also applied dollar deposit interest rates by 1.5 percent for more than 12-month deposits from June 9.

The bank began applying dollar loan interest rates at three percent for short term loans and four percent for medium and long term loans.

Some commercial banks have also adjusted dollar interest rates for savings and loans.

Dong A Commercial Bank applied dollar savings interest rates at 1.5 percent for nine and twelve month deposits from June 1.

At the beginning of June, the Vietnam Bank Association called for its members to slash dollar deposit and loan interest rates by 1.5 percent and three percent respectively.

The current average interest rates for dollar accounts are 1.24-2.65 percent and dollar loans of three to five percent.

Cuts to deposit and loan interest rates were positive for the foreign exchange market, as businesses were hesitant to borrow in dollars to avoid risks in exchange rate fluctuations. It has also helped to reduce speculation of the dollar.

At a Government meeting to discuss Vietnam’s foreign exchange market, the ministries of Finance, and Planning and Investment agreed that world economy shows sign of recovery.

Export and import demands have increased, but direct foreign investment is forecast to fall, causing problems for the domestic balance of payments.

The general secretary of the Vietnam Bank Association, Duong Thu Huong, said commercial banks should agree to slash foreign currency deposit and loans that are suitable to supply and demand.

Some export companies have received Government-backed subsidized loans, however, they did not pay banks back in dollars, with some companies just wanting to borrow dong, instead of dollars to avoid exchange rate fluctuations.

According to Dr. Tran Huy Hoang, dean of the Bank Department of the University of Economics, Ho Chi Minh City, companies are still hesitant to borrow dollars due to high lending interest rates and currency fluctuations.

Banks should decrease lending interest rates, as well as carry out measures to stabilize rates between the dollar and dong, he added.